1. The Jacksonville Jaguars earn $175,000 in ordinary income in 2012. They also receive $150,000 in interest income and make a $50,000 payment out. Assuming a flat tax rate of 33%, calculate their taxes paid and after-tax profits.
2. Repeat Problem #2, but use the following tax brackets:
Income
Bracket Tax Rate
$0 to $35,000
5%
$35,001 to $85,000
10%
$85,001 to $110,000
15%
$110,001 to $155,000
25%
> $155,001
42%
3. What is the marginal and average tax rate for the Jaguars in this case? Which tax structure (flat or bracketed) would they prefer, based on your calculations?