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Prior to the Tax Cuts and Jobs Act, corporations faced a progressive tax rate schedule with rates ranging from 15% to 39%. Under that old tax law, a firm with taxable income of $100 million would have owed taxes of $35 million. Under the Tax Cuts and Jobs Act, the corporate tax rate is a flat 21%. For a firm that makes $100 million in taxable income, the size of the tax reduction that the firm enjoys because of the new tax law is closest to ________.
Group of answer choices
A. $18 million
B. $21 million
C. $14 million
D. $35 million
Size of tax reduction=Taxes owed earlier-New tax rate*taxable income=35-100*21%=14 million
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