BY DR. LARRY C. JENKINS, EXTENSION ECONOMIST The Pennsylvania State Univ. UNIVERSITY PARK - Change in the structure of tax rates was a primary selling point for the Tax Reform Act of 1986 as Congress debated the new legislation. Lower rates and few rate brackets were lauded as major benefits that would reduce taxes and make the tax laws more simple and fair. The Tax Reform Act of 1986 does reduce the 14 tax rates under old law to two rates of 15 and 28 per cent in 1988. But a 5 percent rate adjustment in effect produces a third rate bracket of 33 percent for some taxpayers. The alleged two-rate system is really a three-rate system for those taxpayers affected by the highest rate bracket. Transition rules for 1987 provide five tax rates for that year only. The 1987 rates for couples filing a joint return range from a low of 11 percent on an income of $3,000 to 38.5 percent on an income of $90,000. Single taxpayers pay the 11 percent rate on income up to $l,BOO and the 38.5 percent rate on income over $56,000. In 1988, taxpayers will pay a 15 percent tax on an income up to $29,750 for couples, $17,850 for single taxpayers, and $23,900 for heads of households. They will pay a 28 percent tax on income above those levels. Higher-income taxpayers will be subject to an additional 5 percent tax on income above a second level, phasing out the benefits of the lowest tax for them. For joint returns, the 5 percent rate adjustment applies to income between $71,900 and $149,250. Couples with an income above $149,250 pay a 28 percent flat rate on all taxable income. To prevent high-income couples from avoiding the 5 percent adjustment, married couple who file separate returns are required to calculate the ad justment based on their joint in come. Lebanon Co. DHIA Roy E Nolt 145 Bucher Brother's Sheri Hope Lloyd Burkholder Jr Dot Marlin D Heisey James Z Brubaker 584 Irvin Z Brubaker 144 29 Gary Lentz Daisy Star Eugene Gingrich 9 Clifford & Fay Berger Diann 3 Ramona Holstems Althea 3 White Birch Farm 45 3 David Himmelberger Margie 3 Earl & Marilyn Smith Anita 3 Edward L Heagy 109 3 Luke Brubaker 64 3 Aaron Weaver 108 3 Daryl Balmer Hazel 3 Hoover Farms Fuzzy 3 Fannie 3 Amber 3 Twin Gro Holstems 330 3 Kenneth Mase Tops 3 Melvin M Nolt 21 3 15 3 54 3 Phares Z Musser 54 3 Wernerway Farms 49 3 132 3 Raymond & Marlin Getz Total 3 The New Tax Rates: The 5 percent adjustment for single taxpayers begins at an in come level of $43,150 and extends to $89,560. Singles pay the 28 percent flat rate on all taxable income in excess of $89,560. Heads of households experience the 5 percent rate adjustment beginning at an income level of $61,650 and extending to $123,790. The 28 percent flat rate applies to income above $123,790 for heads of households. The effect of the 5 percent ad justment (to remove the benefit of the 15 percent tax rate) and the second 5 percent added tax (to remove the effect of the larger personal exemption), is to convert the alleged two-rate tax system to a three-rate system. The first It may be time for some farmers to turn back the clock and reconsider the ad vantages of diver sification, according to economist Michael Salassi of USDA’s Economic Research Service. Producing three or four commodities in place of one or two will not guarantee a profit, but it is one method of reducing price risk in an uncertain economic environment, according to Salassi. Mixed-enterprise ag riculture a mix of crops, livestock, or both used to be the norm for the traditional American family farm. Since World War 11, however, the typical farm has been gradually transformed into a highly specialized production unit. Salassi admits that specialization has its (Continued from Page B 28) 3 4-5 302 21,846 3 8 3 7-5 305 25,247 3 3 3 5-2 298 23,488 3 6 3 4-1 305 22,667 3 8 26,907 3 0-0 305 18,137 305 19,512 22,314 305 305 6 10 39 25,075 22,062 294 305 23,496 305 21,016 305 25.722 305 23,050 305 22,462 305 21 591 305 24 632 305 6 10 23 653 305 20,245 305 19 626 299 23 799 23,013 21 892 305 305 305 7 11 3 11 4 1 19 238 305 23,288 305 21 819 24 877 22 312 305 305 282 19,152 305 28 025 28,762 305 305 23 833 305 adjustment actually produces a 33 percent marginal tax rate on an income between $71,900 and $149,250 for couples and between $43,150 and $89,560 for single taxpayers. The overall tax rate for these taxpayers does not exceed 28 percent but the true rate structure under which they are taxed con-1 sists of marginal rates of 15, 28,1 and 33 percent. In the case of a couple filling a joint return, the first |29,750 is taxed at a 15 percent rate; an in come between $29,750 and $71,900 is taxed at a 28 percent rate; and an income between $71,900 and $149,250 is taxed at a rate of 33 percent. At a taxable income of more than $149,250 the tax rate for couples is a flat 28 percent of all Three Crops Versus One ■ place. It’s an efficient way to concentrate the resources of the farm and its manager on one or two commodities for maximum volume and productivity. Analysts expect to see farmers experimenting with many different management strategies to cope with the in creased risks. One of the strategies that can work for some farmers is diversification. If properly planned, diversification can help stabilize farm income and reduce the danger that a period of low prices for one com modity will threaten the survival of the entire farm business. In developing a diversification strategy and choosing a new crop or livestock enterprise to add to an existing operation, Salassi offers some common sense guidelines: Select commodities that have different price patterns. Two crops may be no better than one if the prices for both plunge together because both are tied to the same basic market fun damentals. 826 821 851 To the extent possible, new enterprises should complement existing enterprises. For example, a new crop that can be produced with existing, easily borrowed, or inex pensively leased equipment may be a better alternative than a crop that requires ex pensive, specialized equipment. Similarly, resource use will be more efficient and conflicts can be avoided by choosing alternative commodities with labor requirements that are not concentrated in the same peak months of the year when current enterprises require the most attention. 863 1053 812 878 834 973 902 833 817 895 840 910 893 1009 811 831 Before departing from the commodities already produced in your part of the country, evaluate the marketing outlets available and your own entrepre neurial skills. The financial position of a farm business probably won’t be strengthened by adding an enterprise that requires special production and marketing practices about which the farm manager and workers have little or no knowledge. 806 864 816 811 818 807 824 888 833 844 826 897 870 How Much Will You Pay? BUY. SELL.TRADE OR BENT THROUGH THE Fifty comfort stalls, stan tions; 26 Jamesway waterbowls. 215-723-4705. For Sale: 5 hp DeLaval Centeri-Rator Aeration unit for lagoon, $4,000/offer. Call N.Y. 315-365-3268, PA. 717-665-6226. For Sale; Calf Hutches, like new condition w I bucket holders & wire cages. 717-872-4058 Tubular Gates: 7-1 3 /*” rails. B'-$35.38. 10-$40.18. 12’-$42.18. 14’-$45.90. 16'-$49.35. 12Vi gauge 4 P.T. Barb wire, $25. 215-445-6885. Two heated cattle water ers in excellent condition. 717-464-5618. KENCOVE CRIMPING TOOL 4 510t.548.00 PjOVE NEW ZEALAND TYPE HIGH-TENSILE FENCE STRONG • LASTING ECONOMICAL 412 459 8991 I >1 KENCOVE * * cßt tGL)rt* 111 Kendall Lane *** Blairsville PA 15717 _ taxable income. However, the marginal tax rate for these high income couples is 33 percent because they pay the 28 percent flat rate plus a 5 percent added tax on taxable income above $149,250, to offset the benefit of the larger PHONE: 717-626-1164 or 717-394-3047 Mon., Tuos., 8 AM to S PM - Wod., Thur*. A Frt. 7 AM to 5 PM MAP LANCASTER FARMING FOR COMPLETE AND UP TO DATE MARKET REPORTS LIVESTOCK EQUIPMENT MIX TRAILER SALES HORSE-CATTLE-FLATBED TRAILERS 10214 Lanham Severn Road Lanham, Maryland 20706 (301) 464-2574 A division of Jesse R. Austin Enterprises ****************sloo,ooo Discount Coupon**************** toward purchase price of any new IN STOCK unit with this ad thru February 28,1987. Limit one coupon per purchase Largest Selection East of the Mississippi. Over 300 new units IN STOCK in IS brands. Some used units available. New units: 2-horse stock models-6' wide $1995.00 2-horse X-TRA WIDE Thorobred Delux $2995.00 2-horse Thorobred Delux gooseneck $3995.00 4-horse stock combination w/tack compartment. $2995.00 4-horse fully enclosed combination 53695.00 4-horse Delux bumper models 54295.00 4-horse Delux Gooseneck models $6750.00 6 xl6'bumper stock. $2195.00 6'x 16’gooseneck stock $3150.00 7‘/2’xl6' gooseneck stock $4150.00 B'x2o'flatbed gooseneck $2795.00 B'x24’ tn-axle flatbed gooseneck $3995.00 Used units 2-horse Gore $1095.00 2-horse Russler w/4' dressing room $1995.00 2-horse Hartman gooseneck $2500.00 6'xl6'x7' gooseneck stock $2500.00 Trades accepted. Full service shop on premises. Temporary tags provided. Free delivery to New Holland Sales Stables. 2 1 /; miles off Interstate 95 outside of Washington, D.C. New Business Hours starting January 1.1987- Open 9-6. 5 days. CLOSED SATUROAYS A SUNDAYS. personal exemption. The 15, 28, and 33 percent rate brackets become effective January 1, 1968 and are indexed to inflation. The brackets will change based on changes in the general price level in future years. pooeoooooooooeooow uaqoapooopooooa CENTRAL | HIGH-TENSILE i —\ | JOSEPH H. HICKS X | \^l)\ HENCE CONSTRUCTION jj 01. Servicing Central Penna. 9 #2. Written Warranty 9 #3. Guaranteed Estimates 8 #4. Six Years Experience X #5. Strong, Long Lasting, Economical X
Significant historical Pennsylvania newspapers