Corporation A has $86078 in taxable income, and Corporation B has $2.3 million i
ID: 2813581 • Letter: C
Question
Corporation A has $86078 in taxable income, and Corporation B has $2.3 million in taxable income. Suppose both firms have identified a new project that will increase taxable income by $12526. How much more will Corporation B pay in additional taxes than will Corporation A?
use the following table:
Taxable Income Tax rate
$0-50,000 15%
50,001-75,000 25%
75,001-100,000 34%
100,001-335,000 39%
335,001-10,000,000 34%
10,000,001-15,000,000 35%
15,000,001-18,333,333 38%
18,333,334 + 35%
Explanation / Answer
The Both Companies pay tax at the rate of 34% as the company A with $86078 will be in 34% of $75001 - $100000 bracket and Company B with $2300000 will be in 34% of $335001 - $10000000. Both the companies will pay additional tax of $4259 which is 34% of 12526. The amount of tax is same as the marginal tax payable by both the companies are equal. Both companies have the same tax rate if they earn anything over the current net income.
Thus Corporation B pay an additional amount of $0 in additional taxes than Corporation A as they are both in same margin tax rates of 34%