Taxable Income 
$0--$ 5,940 
5,940--17,270 
17,270--37,980 
37,980--49,420 
Over $49,420 
Prior to 1987, also, individuals were taxed on only 40 
percent of a long-term capital gain. The maximum 
effective rate was thus only 20 percent, as com- 
pared to a maximum of 50 percent on ordinary in- 
come. 
For certain individual taxpayers, the rates on 
ordinary income and on long-term gains will be the 
same beginning in 1987. For others, however, 1987 
is a transition year with differences in rates still exist- 
ing (table 1). 
By 1988, the rate differential between long-term 
gains and ordinary income will be eliminated en- 
tirely for all individual taxpayers (table 2). There will 
be only two basic tax rates--15 and 28 percent. For 
Range of Rates 
0-11% 
12-16% 
18-28% 
33% 
38-50% 
married taxpayers filing a joint return, the first 
$29,750 of taxable income will be taxed at 15 per- 
cent and amounts over that at 28 percent. The other 
categories of individual taxpayers will begin paying 
28 percent at somewhat lower levels. However, a 
5-percent surtax will apply to certain income initially 
taxed at 28 percent, resulting in an effective 
marginal tax rate of 33 percent. For married taxpay- 
ers filing a joint return, the 5-percent surtax will be- 
gin at $71,900 of taxable income. 
For corporations, 1987 is also a transition year 
with differences in rates between ordinary income 
and long-term gains still existing until July 1. The old 
rates and the new ones are shown in table 3. 
103 
