Introduction

Since 1980 there have been major changes in federal tax policy. The U.S. Congress enacted five major tax bills: the Economic Recovery Tax Act of 1981 (ERTA), the Tax Equity and Fiscal Responsibility Act of 1982 (TEFRA), the Deficit Reduction Act of 1984 (DEFRA), the Tax Reform Act of 1986 (TRA), and the Omnibus Budget Reconciliation Act of 1990 (OBRA). Congress also had previously enacted the Social Security Amendments of 1977, which increased payroll tax rates throughout the decade, and later enacted the Social Security Amendments of 1983, which accelerated the effective date of those increases and made a portion of social security benefits taxable under the individual income tax. These changes in the law have resulted in a much different tax structure today than the law in effect in 1980. The income-tax rate schedule is lower and flatter, and many tax preferences under the individual income tax have been scaled back or eliminated. The top corporate tax rate is lower, but the investment tax credit has been eliminated and other business investment incentives, which were expanded in ERTA, were subsequently scaled back. The base for payroll taxes is wider and rates are higher. Some excise-tax rates are higher today than at the beginning of the decade, offsetting in part the decline in the real value of excise-tax rates with inflation.