Average corporate tax rates Using the corporate tax rate schedule given in Table 2.1 perform the

QUESTION

Average corporate tax rates Using the corporate tax rate schedule given in Table 2.1, perform the following:a. Calculate the tax liability, after-tax earnings, and average tax rates for the following levels of corporate earnings before taxes: $10,000; $80,000; $300,000; $500,000; $1.5 million; $10 million; and $20 million.b. Plot the average tax rates (measured on the y axis) against the pretax income levels (measured on the x axis). What generalization can be made concerning the relationship between these variables?TABLE 2.1Corporate Tax Rate Schedule$0 to $$ 50,000$ 0+(15% amount over$ 0)50,000 to75,0007500+(25 amount over5000075,000 to100,00013750+(34 amount over75000100,000 to33500022250+(39 amount over100000335,000 to10000000113900+(34 amount over33500010,000,000 to150000003400000+(35 amount over1000000015,000,000 to183333335150000+(38 amount over15000000Over 18,333,333641667+(35 * amount over18333333
Solution: a. Income $ 10,000.00 $ 80,000.00 $ 300,000.00 $ 500,000.00 $ 1,500,000.00 $ 10,000,000.00 $ 20,000,000.00 Tax Liability $1,500 $ 15,200.00 $ 100,250.00 $ 170,000.00 $ 521,650.00 $ 5,150,000.00 $ 1,225,000.45 After

ax Earning $ 8,500.00 $ 64,800.00 $ 199,750.00 $ 330,000.00 $ 978,350.00 $ 4,850,000.00 $ 18,774,999.55 Average Tax Rate 15% 19% 33% 34% 35% 52% 6% b.

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