erage corporate tax rates Using the corporate tax rade schedule gven here perfor

Question

erage corporate tax rates Using the corporate tax rade schedule gven here perform the following Calculabe the tax abey ator-tax eamings, and average tax rates for the tolowing levels of corporate earnings betore taxes $13,000 $79,300 $302,000, $503,000,$1.7 mllion, $9.6 million, and $20 5 million Plot the average tax rates (measured on the y axis) against the pretax income levels (measured on the x ais) What generalization can be made concerning the relationship between these variables? nd the marginal tax rate for the following levels of corporate earnings before taxes $13,000, $79,300, $302,000, $503,000, $1,700,000, 396 mition, and $20 5 million e tax liability for eanings before taves of $13,000s(Round to the nearest dolla) e ater tax eamings on $13,000arn Round to he nearest olar) eaverage tax ratefor the $13,000 i,pretax earings is[.% Round to one deanal place > e tax kebility for earmings before taxes of $79,300 is (Round to the nearest dolar) e athor-tax earmings on $79,300 are(Round to the nearest dollar) average tax rate sor the S79.300 in pretax eamings-E % (Round to one decrnal place ) etax Sability for eamings before taxes of $302,00(Round to the nearest dollar afher -tax earnings on $302,000 are(Round to the nearest dolilar) average tax rate for the $302,000 im pretax eahings isRound to one decimal place tax liability for earmings betore taxes of $503,000isRound to the nearest dollar) ater-tax eanings on $503,000 are Round to the nearest doiler) More Ie rporate Tax Rate Schedule Tax calculation Range of taxable income Base tax rate x amount over base bracket 7.500 : Q5% -anout over 13.750. . CMS xanmrt over 22250 * (3% × amount over 113.900 + (34% xamurt over 3.400,000 + 05% x amount over 5,150 000 + (38% x amout over 6416667 . (35% xamort over 50,000) 75,000) 100.000) 335.000) 10.000 000) 15,000,000) 18,333,333) 5 000 t0 335,000 0 10,000,000 to 335 000 10,000 000 15,000 000 18.333 333 15 00 003 18 333 333 15.000000 Over 18.333,333 Print Done

Explanation / Answer

Find the marginal tax rate for the following levels of corporate earning before taxes $13000, 79300,302000, 503000, 1700000, $ 9.6 million, $ 20.50 million 1) The tax liability for earnings before taxes of $ 13000 is (0.15*13000 )$ 1950 2) The after-tax earnings on $ 13000 are $ (13000-1950) is $ 11050 3) The average tax rate for the $ 13000 in pretax earnings is (1950/13000) 15% 4) The tax liability for earnings before taxes of $ 79300 is $ 15212 Base rate + 34% amount over 75000 13750 + 34%*(79300-75000) 5) The after-tax earnings on $ 79300 are $ (79300-15212) is $ 68250 6) The average tax rate for the $ 79300 in pretax earnings is (15212/79300) 19.18% 7) The tax liability for earnings before taxes of $ 302000 is $ 90930 Base rate + 39% amount over 100000 22250 + 34%*(302000-100000) 8) The after-tax earnings on $ 302000 are $ (302000-90930) is $ 211070 9) The average tax rate for the $ 302000 in pretax earnings is (90930/302000) 30.11% 10) The tax liability for earnings before taxes of $ 503000 is $ 171020 Base rate + 34% amount over 335000 113900 + 34%*(503000-335000) 11) The after-tax earnings on $ 503000 are $ (503000-171020) is $ 331980 12) The average tax rate for the $ 503000 in pretax earnings is (15212/79300) 34% 13) The tax liability for earnings before taxes of $ 1700000 is $ 578000 Base rate + 34% amount over 335000 113900 + 34%*(1700000-335000) 14) The after-tax earnings on $ 1700000 are $ (1700000-578000) is $ 1122000 15) The average tax rate for the $ 1700000 in pretax earnings is (578000/1700000) 34% 16) The tax liability for earnings before taxes of $ 9600000 is $ 3264000 Base rate + 34% amount over 335000 113900 + 34%*(9600000-335000) 17) The after-tax earnings on $ 9600000 are $ (79300-15212) is $ 6336000 18) The average tax rate for the $ 9600000 in pretax earnings is (3264000/9600000) 34% 19) The tax liability for earnings before taxes of $ 20500000 is $ 7075000 Base rate + 35% amount over 10000000 3400000 + 35%*(20500000-10000000) 20) The after-tax earnings on $ 20500000 are $ (20500000-7075000) is $ 13425000 21) The average tax rate for the $ 20500000 in pretax earnings is (15212/79300) 34.51% Income before Taxes(Amount in $) Average tax rate 13000 15.00% 79300 19.18% 302000 30.11% 503000 34.00% 1700000 34.00% 9600000 34.00% 20500000 34.51% As the income increases, the tax rate increases

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