page_title: Economic Recovery Tax Act of 1981
hierarchical_section_title: Economic Recovery Tax Act of 1981
caption_attribution_description: President Ronald Reagan signs the Economic Recovery Tax Act of 1981, Rancho del Cielo, 1981.
context_page_description: The Economic Recovery Tax Act of 1981 was a major tax cut designed to encourage economic growth. Also known as the "Kemp–Roth Tax Cut", it was a federal law enacted by the 97th United States Congress and signed into law by President Ronald Reagan. The Accelerated Cost Recovery System was a major component, and was amended in 1986 to become the Modified Accelerated Cost Recovery System.
  Republican Congressman Jack Kemp and Republican Senator William Roth had nearly won passage of a tax cut during the presidency of Jimmy Carter, and Reagan made a major tax cut his top priority upon taking office. Though Democrats maintained a majority in the House of Representatives during the 97th Congress, Reagan was able to convince conservative Democrats like Phil Gramm to support the bill. ERTA passed Congress on August 4, 1981, and was signed into law on August 13, 1981. ERTA was one of the largest tax cuts in U.S. history, and ERTA and the Tax Reform Act of 1986 are known together as the Reagan tax cuts. Along with spending cuts, Reagan's tax cuts were the centerpiece of what some contemporaries described as the conservative "Reagan Revolution."
context_section_description: The Economic Recovery Tax Act of 1981 (ERTA) was a major tax cut designed to encourage economic growth. Also known as the "Kemp–Roth Tax Cut", it was a federal law enacted by the 97th United States Congress and signed into law by President Ronald Reagan.   The Accelerated Cost Recovery System (ACRS) was a major component, and was amended in 1986 to become the Modified Accelerated Cost Recovery System (MACRS).
  Republican Congressman Jack Kemp and Republican Senator William Roth had nearly won passage of a tax cut during the presidency of Jimmy Carter, and Reagan made a major tax cut his top priority upon taking office. Though Democrats maintained a majority in the House of Representatives during the 97th Congress, Reagan was able to convince conservative Democrats like Phil Gramm to support the bill. ERTA passed Congress on August 4, 1981, and was signed into law on August 13, 1981. ERTA was one of the largest tax cuts in U.S. history, and ERTA and the Tax Reform Act of 1986 are known together as the Reagan tax cuts. Along with spending cuts, Reagan's tax cuts were the centerpiece of what some contemporaries described as the conservative "Reagan Revolution."
  Included in the act was an across-the-board decrease in federal income tax rates. The top marginal tax rate fell from 70 percent to 50 percent. Meanwhile, the lowest rate was lowered from 14 percent to 11 percent. To prevent future bracket creep, the new tax rates were indexed for inflation. ERTA also slashed estate taxes, capital gains taxes, and corporate taxes. Critics of the act claim that it worsened federal budget deficits, while supporters credit it for bolstering the economy during the 1980s. Supply-siders argue for the tax cuts with the argument that the tax cuts would increase tax revenue; however, tax revenues declined (relative to a baseline without the cuts) due to the tax cuts and the deficit ballooned during Reagan's term in office. 
  Much of the 1981 ERTA was backed out in September 1982 by the Tax Equity and Fiscal Responsibility Act of 1982 (TEFRA), sometimes called the largest tax increase of the post-war period. The Modified Accelerated Cost Recovery System (MACRS) came in 1986.
caption: President Ronald Reagan signs the bill at Rancho del Cielo in 1981
exif: {}