Economic Recovery Tax Act of 1981
- Economic Recovery Tax Act of 1981
The Economic Recovery Tax Act of 1981 (also known as ERTA or the Kemp-Roth Tax Cut) was "A bill to amend the Internal Revenue Code of 1954 to encourage economic growth through reductions in individual income tax rates, the expensing of depreciable property, incentives for small businesses, and incentives for savings, and for other purpose." USStatute|97|34|95|172|1981|08|13) It also reduced marginal income tax rates in the United States by 25% over three years (the top rate falling from 70% to 50% while the bottom rate dropped from 14% to 11%) and indexed the rates for inflation, though the indexing was delayed until 1985. Its sponsors, Representative Jack Kemp and Senator William Roth, had hoped for more significant tax cuts, but settled on this bill after a great debate in Congress. It passed Congress on August 4, 1981 and was signed into law on August 13, 1981 by President Ronald Reagan at his California ranch.
In 2003 (revised 2006), the United States Department of the Treasury released a non-partisan economic study [ cite journal|author= [http://www.treasury.gov/offices/tax-policy/offices/ota.shtml Office of Tax Analysis] |publisher=United States Department of the Treasury|title=Revenue Effects of Major Tax Bills|date=2003, rev. Sept 2006|url=http://www.ustreas.gov/offices/tax-policy/library/ota81.pdf|id=Working Paper 81, Table 2|accessdate=2007-11-28] showing the effect on government revenues of all Reagan-era tax bills. As the chart shows, the 1981 tax act produced a major loss in government revenues (almost 3% of GDP), in marked contrast to other Reagan-era tax bills, which had neutral or even revenue-gathering effects.
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Accelerated Cost Recovery System — (ACRS) An accounting method whereby the cost of a fixed asset is written off for tax purposes over a prescribed period of time. Instituted by the Economic Recovery Tax Act of 1981, and modified by Tax Reform Act of 1986, the system places assets… … Black's law dictionary
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