Final answer:
The combined income tax rate for a corporation under the given tax rates of 21% federal and 6% state is less than 29% due to the deductibility of state taxes before federal taxes are applied.
Step-by-step explanation:
The question asks about the combined income tax rate for a corporation that is subject to a federal income tax rate of 21% and a state income tax rate of 6%. To calculate the combined rate, it is important to understand that state income tax is typically deductible before federal tax is applied. Therefore, the combined rate would not be simply adding the two rates together (which would equal 27%), but instead, the state tax reduces the taxable income for federal tax purposes.
However, without applying any specific deductions and considering a straightforward addition of the different tax rates, the combined rate would be lower than the sum of the individual rates because the taxable income would be less after state tax is accounted for. This results in a combined tax rate that is less than 29%.
The combined income tax rate for a corporation subject to both federal and state taxes cannot be accurately determined simply by adding the two rates due to the deductibility of state taxes on the federal return. Other types of federal taxes include payroll taxes, which cover social security and Medicare. The federal income tax system is progressive, but social security tax may be considered regressive due to its income cap.