# Question: Refer to the corporate marginal tax rate information in Table

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