Question

Boeing is considering opening a plant in one of two neighboring states, Oregon or California.

Let’s just say, California has a corporate tax rate of 15%. If operated in this state, the plant is expected to generate $1,200,000 pretax profit.

In Oregon state has a corporate tax rate of 5% and operation in Oregon state, the plant is expected to generate $1,085,000 of pretax profit.

Which state should Boeing choose based upon tax considerations only?

Why do you think the plant in the state with a lower tax rate would produce a lower pretax income? ( Please pay more attention on this question)

Thank you!

Answer 1

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