# The Tax Reform Act of 1986: Comment on the 25th Anniversary

 dc.contributor.author Feldstein, Martin S. dc.date.accessioned 2012-05-15T17:19:40Z dc.date.issued 2011 dc.identifier.citation Feldstein, Martin S. 2011. The Tax Reform Act of 1986: Comment on the 25th Anniversary. Working Paper 17531, National Bureau of Economic Research. en_US dc.identifier.uri http://nrs.harvard.edu/urn-3:HUL.InstRepos:8747960 dc.description.abstract The Tax Reform Act of 1986 was a powerful pro-growth force for the American economy. Equally important, as we look back on it after 25 years, we also see that it taught us two important lessons. First, it showed that politicians with very different political philosophies on the right and on the left could agree on a major program of tax rate reduction and tax reform. Second, it showed that the amount of taxable income is very sensitive to marginal tax rates. More specifically, the evidence based on the 1986 tax rate reductions shows that the response of taxpayers to reductions in marginal tax rates offsets a substantial portion of the revenue that would otherwise be lost. This implies that combining a broadening of the tax base that raises revenue equal to 10 percent of existing personal income tax revenue with a 10 percent across the board cut in all marginal tax rates would raise revenue equal to about four percent of existing tax revenue. With personal income tax revenue in 2011 of about $1 trillion, that four percent increase in net revenue would be$40 billion at the current level of taxable income or more than \$500 billion over the next ten years. en_US dc.description.sponsorship Economics en_US dc.language.iso en_US en_US dc.relation.isversionof http://www.nber.org/papers/w17531 en_US dash.license LAA dc.title The Tax Reform Act of 1986: Comment on the 25th Anniversary en_US dc.type Research Paper or Report en_US dc.description.version Author's Original en_US dash.depositing.author Feldstein, Martin S. dc.date.available 2012-05-15T17:19:40Z

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