Boeing Is Considering Opening a Plant in Two Neighboring States

Essay

Boeing is considering opening a plant in two neighboring states. One state has a corporate tax rate of 15%. If operated in this state, the plant is expected to generate $1,200,000 pre-tax profit. The other state has a corporate tax rate of 5%. If operated in this state, the plant is expected to generate $1,085,000 of pre-tax profit. Which state should Boeing choose based upon tax considerations only? Why do you think the plant in the state with a lower tax rate would produce a lower pre-tax income?