1 Chapter 9 Section 4 Notes Tax Reform in 1981Ronald Reagan introduced the Economic Recovery Tax Act Reduced taxes for individuals and businesses (economic growth) Moved the highest tax bracket from 70% to 50% Businesses got tax relief in the form of accelerated depreciation and investment tax credits Dramatically dropped government revenues (12.5 to 6.2)

2 Chapter 9 Section 4 Notes Tax Reform: 1986, 1993Congress reduced the 16 marginal tax brackets to 2 brackets (15% and 28%) Added the alternative minimum tax: People had to pay a minimum tax of 20%, regardless of loopholes in the tax codes The Omnibus Budget Reconciliation Act was created because of a need for the government to balance its budget Added 2 tax brackets (36% and 39.6%)

3 Chapter 9 Section 4 Notes Tax Reform of 1997 The Taxpayer Relief ActThe tax on capital gains was reduced from 28% to 20% Estate and gift taxes were lowered Tax credits for child and educational expenses were included Nearly half of the tax reductions went to the top 20% of income earners (lowest 20% received about 1% of the benefits)

4 Chapter 9 Section 4 Notes Tax Reform in 2001 Add the 10% bracketThe top 4 tax brackets would be gradually reduced Make tax reductions retroactive to the beginning of the year so that individual taxpayers could receive immediate refund checks (cost the gov’t $21 million) Tax Reform in 2003 Accelerate the 2001 tax reforms The top 4 marginal tax brackets were reduced immediately (originally this was suppose to happen in 2006) The child tax credit was expanded to $1000 Capital gains tax was reduced from 20% to 15%