As of 2012,which one of the following statements concerning corporate income taxes is correct?
A)The largest corporations have an average tax rate of 39 percent.
B)The lowest marginal rate is 25 percent.
C)A firm's tax is computed on an incremental basis.
D)A firm's marginal tax rate will generally be lower than its average tax rate once the firm's income exceeds $50,000.
E)When analyzing a new project, the average tax rate should be used.

Question

Quizplus · Accepted Answer

Corporate income taxes are computed on an incremental basis, meaning that the tax rate increases as taxable income increases. Option A is incorrect as the largest corporations often pay less than the statutory 35 percent rate due to deductions, credits, and loopholes. Option B is incorrect as the lowest marginal tax rate is actually 15 percent for corporations with taxable income below $50,000. Option D is incorrect as a firm's marginal tax rate is always higher than its average rate due to the incremental nature of corporate taxes. Option E is incorrect as the marginal tax rate should be used when analyzing a new project because it reflects the tax impact of additional income.

As of 2012,which One of the Following Statements Concerning Corporate