UNIVERSITY PARK The
Tax Reform Act of 1986 will more
than double the federal tax bill of
almost half of Pennsylvania’s fam
ily farms, according to a Penn
State study.
For 41 percent of the state’s
family-owned farms, taxes will
increase an average of 132 percent,
or $1,343, when the new law is ful
ly implemented in 1988, con
cluded Larry C. Jenkins, extension
economist in Penn State’s Depart
ment of Agricultural Economics
and Rural Sociology, and William
Grisley, formerly of the
department.
For 45 percent of the farm fami
lies, there should be no change in
income tax, Jenkins said. Many of
these families paid little income
tax under the prior law because of a
combination of factors, including
low earnings, substantial personal
deductions, large business deduc
tions such as depreciation, and the
use of investment credits.
A lucky 14 percent will actually
pay less tax under the new law, the
researchers found. They are not
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tmS (717)274-5333 (717)354-0584
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Tax Reform Means Double The Taxes
sure what factors are involved in
those cases, but believe the larger
standard deduction and personal
exemptions included in the new
law may be responsible.
However, 41 percent of the
state’s more than 50,000 family
farms will pay more in taxes in the
wake of tax reform. Jenkins said
the increase will vary depending
on the type of farm, family size and
other factors.
The researchers analyzed data
from more than 3,000 Pennsylva
nia single-family farms of all types
to predict tax payments.
Those dairy farms that pay high
er taxes will see their bills go up an
average of $1,305 more per family,
an average increase of 159 percent,
Jenkins said. Other increases and
percent increases for those farms
that see increases will be: crops,
$ 1,292 more (88 percent increase);
beef, $996 (89 percent): sheep,
$695 (67 percent); hogs, $1,543
(116 percent); turkeys/broilers,
$2,270 (106 percent); eggs, $3,970
(87 percent); vegetables, $1,114
(185 percent), and fruit, $2,039 (77
percent),
For dairy farmers, the most
devastating portion of the new tax
law is probably the loss of the capi
tal gain exclusion, Jenkins said.
Formerly, farmers who sold cull
livestock, such as aging dairy
cows, only had to pay taxes on 40
percent of the sale price. Now, they
must pay taxes on the entire
amount, adding $3,900 to the tax
able income of the average dairy
farm.
For poultry farmers, the loss of
investment credits will hurt the
most, Jenkins said. Many of them
have been expanding in recent
years, and were able to deduct 10
percent of the cost of buildings and
equipment from tax payments each
year.
Also affecting tax payments are
loss of the two-earner deduction;
changes in depreciation regula-
6.65%
APR
Financing
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UMBERGER’S of FONTANA G. BENJAMIN MILLER, JR.
Lebanon, PA Rouzerville, PA 17250
(717) 867-5161 (717) 762-2386
tions; and changes in the way far- Act of 1986 on Pennsylvania Far
mers count expenses they must put mers is available by writing to
into an operation before they see a Farm Management Extension, 202
return on their investments, Jenk- Armsby Building, Penn State, Uni
ins said. versity Park, Pa. 16802, or by tele-
A detailed review of the study phoning (814) 865-7656
on the impact of the Tax Reform
Atlantic Schedules Picnic•
SOUTHAMPTON PA The picnic is open to members
Atlantic Dairy Cooperative dis- Districts, 3,5, 6,7, 11, 12, 15
tricts in the Lancaster and Lebanon 35. Members are asked to
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Dr. Paul E. Hand, Atlantic’s am - with ,unch scheduled for
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speaker. Hand will report on Atlantic Dairy Cooperative rep
cooperative business, noting the resents 4,100 dairy farm families
price situation and the status of the Pennsylvania, New York, New
Atlantic merger. Jersey, Delaware, Maryland, Vir
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