Question

FINLULU LALUIU CU LULU ALU UU 7. Marginal tax rates (extra credit, 1 point each). Calculate the amount of total additional taxes, assuming: a. Pre-tax income increases from $230,000 to $315,000. b. Pre-tax income increases from $750,000 to $937,000. c. Pre-tax income increases from $4,123,000 to $5,078,000. d. Pre-tax income increases from $350,000 to $426,000. e. Pre-tax income increases from $3,500,000 to $3,990,000.

Answer 1

Data provided is assumed to be on or after 2018 and of US resident corporation.

The United States imposes a tax on the profits of US resident corporations at a rate of 21 percent

If it is assumed that pre-tax income given in question is of corporation then the following will be the marginal Tax rate:-

a. Marginal Tax Rate = 21%, Additional Taxes= ($315,000 - $230,000) * 21% = $17,850

b. Marginal Tax Rate = 21%, Additional Taxes= ($937,000 - $750,000) * 21% = $39,270

c. Marginal Tax Rate = 21%, Additional Taxes= ($5,078,000 - $4,123,000) * 21% = $200,550

d. Marginal Tax Rate = 21%, Additional Taxes= ($426,000 - $350,000) * 21% = $15,960

e. Marginal Tax Rate = 21%, Additional Taxes= ($3,990,000 - $3,500,000) * 21% = $102,900

Conclusion:- No matter how much the income increases the Corporate tax rate is flat 21%.