Table 2.1 Corporate Tax Rate Schedule Tax calculation Range of taxable income Base tax + (Marginal rate x amount over base bracket) $ 0 to $ 50,000 $ 0 + (15% x amount over $ 0) 50,000 to 75,000 7,500 + (25 x amount over 50,000) 75,000 to 100,000 13,750 + (34 x amount over 75,000) 100,000 to 335,000 22,250 + (39 x amount over 100,000) 335,000 to 10,000,000 113,900 + (34 x amount over 335,000) 10,000,000 to 15,000,000 3,400,000 + (35 x amount over 10,000,000) 15,000,000 to 18,333,333 5,150,000 + (38 x amount over 15,000,000) Over 18,333,333 6,416,667 + (35 x amount over 18,333,333) P2-2 Average corporate tax rates - Using the corporate tax rate schedule given in Table 2.1, perform the following: a. Calculate the tax liability, after-tax earnings, and average tax rates for the following levels of corporate earnings before taxes: $10,000; $80,000; $300,000; $500,000; $1.5 million; $10 million; and $20 million. b. Plot the average tax rates (measured on the y axis) against the pretax income levels (measured on the x axis). What generalization can be made concerning the relationship between these variables?
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