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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