AP US Government and Politics by Curt Lader

Author:Curt Lader
Language: eng
Format: epub
Publisher: Barrons Educational Series
Published: 2020-06-04T00:00:00+00:00

Budget Reforms

Attempting to find a way of helping the economy and closing tax loopholes, President Reagan asked Congress to pass the most far-reaching tax-reform measure since the income tax was instituted. Supported by liberal Democratic Senator Bill Bradley of New Jersey, this law called for tax-code changes that would result in a restructuring of tax brackets and eliminating many tax deductions. The law, supported by both Democrats and Republicans, passed in 1986 and succeeded in these two objectives.

The result was that many Americans received a tax cut. And because many loopholes were addressed, it was hoped that additional income would offset the loss of revenue from the tax cut received by the middle class. The law reduced the number of brackets from 15 to 3, it slightly increased deductions for individuals and families, and it eliminated many other deductions. Even though the law succeeded in its objectives, because the expense side of the budget was not kept in check, the deficit still increased dramatically. From 1981 to 1992 the overall deficit quadrupled. However, Clinton’s deficit-reduction programs eliminated the deficit during his administration. By 1998, the federal budget was balanced, and there was an anticipated budget surplus. The political argument then arose as to what should be done with any surplus. Some of the suggested uses for the surplus included reducing the national debt, saving Social Security, decreasing tax rates for all Americans, and increasing spending for government programs. This surplus was short lived.

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