Question

assume that a corporation’s pretax net income is taxable (Federal + State) based on 21% of the first $300,000, 30% of the next $400,000, and 34% of anything beyond that.

1. If the company made $800,000, what is the corporation’s marginal tax rate?

Answer 1

Solution

27.125%

Explanation

Since the Question itself provides you with different Tax Slab and Tax Rate.

Amount	Tax Rate
First $300,000	21%
Next $400,000	30%
Beyond	34%

So here the income amount is $800,000

So according to the Given Slab

Amount	Tax Rate	Tax Amount
$300,000	21%	$63,000
$400,000	30%	$120,000
$100,000	34%	$34,000

• 300,000 x 21% = 63,000
• 400,000 x 30% = 120,000
• 100,000 x 34% = 34,000

Total Tax Amount = $2,17,000 (63,000 + 120,000 + 34,000)

Since here we need to find Marginal Tax Rate

it is given as below

=217,000 / 800,000

=0.27125

=27.125%