Refer to the corporate marginal tax rate information in Table 2.3.

a. Why do you think the marginal tax rate jumps up from 34 percent to 39 percent at a taxable income of $100,001, and then falls back to a 34 percent marginal rate at a taxable income of $335,001?
b. Compute the average tax rate for a corporation with exactly $335,001 in taxable income. Does this confirm your explanation in part (a)? What is the average tax rate for a corporation with exactly $18,333,334? Is the same thing happening here?
c. The 39 percent and 38 percent tax rates both represent what is called a tax “bubble.” Suppose the government wanted to lower the upper threshold of the 39 percent marginal tax bracket from $335,000 to $200,000. What would the new 39 percent bubble rate have to be?
Use the following information for Taco Swell, Inc., for Problems 25 and 26 ( assume the tax rate is 34 percent):

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TABLE 2.3 Taxable Income Tax Rate Corporate Tax Rates 50,000 75,000 75,001-100,000 100,001335,000 335,001-10,000,000 10,000,001-15,000,000 15,000,001-18,333,333 15% 25 34 39 34 35 38 35 50,001 18,333,334+ 2010 2011 Sales Depreciation Cost of goods sold Other expenses Interest Cash Accounts receivable $11,573 12,936 1,736 4,707 824 926 6,466 9,427 1,147 24,696 54,273 4,644 15,288 1,618 1,661 3,979 946 776 6,067 8,034 1,171 20,320 50,888 4,384 14,283 1,411 2 Short-term notes payable Long-term debt Net fixed assets Accounts payable Inventory Dividends