Reagan Tax Reform

About Reagan Tax Reform

The Tax Reform Act of 1986 was signed by President Reagan on October 22, 1986. The act was the result of a bipartisan effort led by Reagan, Treasury Secretary James Baker, and Democratic Congressmen Dan Rostenkowski and Richard Gephardt. The act eliminated 60 billion in tax preferences, including the deduction for credit card interest and the preferential treatment of capital gains. The top individual rate fell from 50 percent to 28 percent. The corporate rate fell from 46 percent to 34 percent. Millions of low income Americans were removed from the tax rolls entirely. The reform was revenue neutral. It was hailed as a model of bipartisan cooperation. Unfortunately, subsequent Congresses undid much of the simplification by adding new preferences and special provisions.