Tax Reform Act of 1986

• Author: Jeffrey Lehman, Shirelle Phelps

Page440

The Tax Reform Act of 1986 (100 Stat. 2085, 26 U.S.C.A. §§ 47, 1042) made major changes in how income was taxed. The act either altered or eliminated many deductions, changed the tax rates, and eliminated several special calculations that had been permitted on the basis of marriage or fluctuating income. Though the act was the most massive overhaul of the tax system in decades, some of its key provisions were changed in the Revenue Reconciliation Act of 1993 (107 Stat. 416).

Calling the bill a victory for fairness, President Ronald Reagan signs the Tax Reform Act of 1986 into law on the south lawn of the White House.

AP/WIDE WORLD PHOTOS

The 1986 act reduced the number of INCOME TAX rates to two rates of 15 percent and 28 percent for most taxpayers, although a third rate of 33 percent was imposed on income within a certain upper-middle income bracket. Congress and the administration of President RONALD REAGAN believed a policy of low rates on a broad tax base would stimulate the economy and end an era of...