Question

What would be the marginal and average tax rates for a corporation with an income level of $100,000?

Answer 1

Answer:

Marginal tax rate = 34%

Average tax rate = 22.25%

Explanation:

The marginal tax rate is the rate of tax income earners incur on each additional dollar of income. As the marginal tax rate increases, the taxpayer ends up with less money per dollar earned than he or she had retained on previously earned dollars.

DATA

Income level = 100,000

Corporation Tax rates

0-50,000 = 15%

50,000 - 75,000 = 25%

75,000 - 100,000 = 34%

Marginal tax rate = 34%

Solution

Income tax owed = (15% x 50000)+(25% x 25000)+(34%*25000)  

Income tax owed = 22,250      

Average tax rate = 22,250/100000

Average tax rate = 22.25%