ABSTRACT
Guidelines for corporate income taxes in the United States are contained in the 1986 Tax Reform Act. Its key points as they apply to capital investment decisions are summarized in this appendix.
Corporate tax rate The federal income tax rates for corporations are:
Taxable income ($) First Next Over
50,000 25,000 75,000
Tax rate (%) 15 25 34
T=0.15 (50,000)+0.25 (25,000)+0.34 (25,000)=$22,250
Therefore the firm's average tax rate is 22.25%, although its marginal tax rate, i.e. the rate of the last income dollar, is 34 %.
