The Effects Of Changes In Federal Income And Social Security Taxes On Farmers

Abstract

AbstractThis paper examines the impact of the Tax Reform Act of 1986 and the Social Security Amendments of 1983 on effective tax rates and average tax payments for farmers. The 1987 and 1988 Internal Revenue Service Individual Public Use Tax Files were used to estimate 1987 and 1990 tax rates and burdens. Results suggest that despite recent reductions in marginal income tax rates, the Federal income tax continues to be progressive. However, the regressive nature of the social security and self-employment tax greatly reduces the progressivity of the combined Federal income and payroll tax burden. For most farmers, combined social security and self-employment tax payments exceed Federal income tax liability.