Suppose your firm earns $4 million in taxable income. What is the firm’s tax liability? What is the average tax rate? What is the marginal tax rate?
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Note Quote :"Since January 1, 2018, the nominal federal corporate tax rate in the United States of America is a flat 21% due to the passage of the Tax Cuts and Jobs Act of 2017."
Firm's taxable income = $4m
Flat Tax rate = 21%
Tax liability = $4m * 21% = $ 0.84m
Average tax rate = total tax liability / Taxable income = 0.84m / 4m = 21%
Marginal tax rate is the rate which is applicable to next taxable dollar.
In present case, as whole taxable income is taxed at flat 21%, so Marginal rate is also 21% as every dollar income is taxed at flat rate.
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