T12S-Chp-01-7-Fed Corp Income Tax Rates

# T12S-Chp-01-7-Fed Corp Income Tax Rates - \$6,250 First...

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e0cccfed60dbcb5732406d31d4430a90caed6629.xls Fed Corp Income Tax Rates Why do we increase the corporate tax by 5%? First, compute amount of extra tax collected as result of using a 39% rate on taxable income in the range from \$100,000 to \$335,000. Top of range for 39% rate \$335,000 Bottom of range for 39% rate \$100,000 Amount subject to extra 5% \$235,000 Surtax 5% Extra tax from 5% increase \$11,750 You get the benefit of the 15% and 25% corporate income tax rates only if your taxable income does not exceed \$100,000. When your taxable income goes above \$100,000, Congress considers you to be a fat cat, and you make too much money. You don't deserve to use the lower tax rates (15% and 25%). So Congress takes back from you the benefit of using those lower rates --- by tacking on an extra 5% rate. Actual Tax on first \$100,000 First layer \$50,000 15% \$7,500 First layer \$25,000 25%
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Unformatted text preview: \$6,250 First layer \$25,000 34% \$8,500 \$100,000 \$22,250 Tax rate 34% Tax on First \$100,000 at 34% \$34,000 Actual Tax on first \$100,000 (\$22,250) Amount of tax saved on first \$100,000. \$11,750 This is the amount of extra tax resulting from extra 5% rate (see above). A corporation with taxable income that is a little above \$100,000 loses some of the benefit. [If taxable income is \$110,000, the corporation pays an extra \$500 (5% of \$10,000).] If the corporation has taxable income of \$335,000 or more, the extra 5% tax takes back all of the benefit of the 15% and 25% rates. The same type of process is repeated with the extra tax rate of 3% on taxable income above \$15,000,000. See Textbook page 359. Would a corporation prefer to have taxable income of \$100,000 in year 1 and \$100,000 in year 2, or \$110,000 in year 1 and \$90,000 in year 2?...
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## This note was uploaded on 03/09/2012 for the course ACCT 4220 taught by Professor Burton during the Spring '08 term at UNC Charlotte.

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