Assuming at the $50,000 income level that the corporate tax rate increases from 15% to 25%, which of the following statements is correct for a firm with $75,000 of taxable income?

Question

Quizplus · Accepted Answer

The firm's taxable income ($75,000) is above the $50,000 threshold where the corporate tax rate increases from 15% to 25%. Therefore, the average tax rate would be calculated as follows: 
- The first $50,000 of taxable income is taxed at 15%, resulting in $7,500 of tax liability. 
- The remaining $25,000 of taxable income ($75,000 - $50,000) is taxed at 25%, resulting in $6,250 of tax liability. 
- Total tax liability is $7,500 + $6,250 = $13,750. 
- Average tax rate is $13,750 ÷ $75,000 = 18.33%.

Assuming at the $50,000 Income Level That the Corporate Tax