Tax Reform Act 1986

About Tax Reform Act 1986

The Tax Reform Act of 1986 was the most comprehensive US tax reform of the 20th century. The act was brokered by President Reagan and Congressmen Dan Rostenkowski and Richard Gephardt. The act simplified the tax code by eliminating many deductions and tax shelters. It reduced the top individual rate from 50 percent to 28 percent and the corporate rate from 46 percent to 34 percent. The act broadened the tax base by closing loopholes, making the reform revenue neutral. The 1986 reform is considered a model of bipartisan tax policy. Subsequent tax laws, including the 1990 and 1993 Clinton tax increases, the 2001 and 2003 Bush tax cuts, and the 2017 TCJA, reversed many elements of the 1986 reform by adding deductions and widening rate differentials between ordinary income and capital gains.