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?

2008 $ 7,233 1,038 2,487 2009 $ 8,085 1,085 2,942 591 515 485 579 Sales Depreciation Cost of goods sold Other expenses Interest Cash Accounts receivable Short-term notes payable Long-term debt Net fixed assets Accounts payable Inventory Dividends 3,792 5,021 732 12.700 4,041 5,892 717 15,435 33.921 4,025 9,555 1,011 31,805 3,984 8,927 882