The Reagan Era saw a large reduction in tax rates, a continuation of post World War II trends, and a significant jump in Federal Revenue by the end of his first term. The Economic Recovery Tax Act of 1981 began a phased reduction of the top rate from 70% to 50%. The Tax Reform Act of 1986 cut the top rate further from 50% to 28% while dramatically reducing the number of brackets and simplifying the tax code.
Significance:
- Top Marginal Tax rates dropped from 70% to 28% during this period.
- Reduction and simplification of rates from 34 Tax Brackets in 1978 to just 2 in 1989 at 15% and 28% for incomes over $30,950 ($79,820 in 2025)
- This period reduction saw in Volker Era period of high interest rates from a peak of 21% in 1980 to ~9-12% in the Reagan’s first term
- Inflation peaked in 1980 at 14.8%
- The period saw a increase in Cold War Era spending, and deficit increases
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