Question

The 39 percent and 38 percent tax rates both represent what is called a tax "bubble." suppose the government wanted to lower the upper threshold of the 39 percent marginal tax bracket from $335,000 to $208,000. what would the new 39 percent bubble rate have to be? (do not round intermediate calculations. enter your answer as a percent rounded to 2 decimal places,
e.g., 32.16.)

Answer 1

Answer:

The answer is 44.84%

Explanation:

39% tax bracket takes back the advantage of the lower 15% and 25% tax rates.

The process will finish once the income that is taxable gets to $10 million.

Therefore, you can get the tax attributable to taxable income which ranges from $335,000 to $10 million by using all the rates in the above schedule or, more simply, by multiplying by 34%

208000*34% = 50000*15% + 25000*25% + 25000*34% + 108000*T%

70720 = 22250 +108000*T%

T=44.84%