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 marginal tax rate is the rate at which the last dollar of income is taxed, which in this case increases to 25% at the $50,000 income level. The average tax rate is calculated by dividing the total tax paid by the total income. Since the firm's income is $75,000 and the tax rate increases at $50,000, the average tax rate will be less than 25% but more than 15%, making option D (average tax rate is 18.33%) correct. This suggests a blended rate due to the progressive tax structure, not the marginal rate at the last dollar earned.

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