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Economic Recovery Tax Act
(redirected from ERTA)

   Also found in: Acronyms 0.01 sec.
Economic Recovery Tax Act
United States legislation, passed in 1981 and signed by President Ronald Reagan that cut marginal tax rates significantly. For example, it cut the top tax rate from 70% to 50% over three years and the bottom rate from 14% to 11%. The Act was intended to stimulate economic growth by putting more money in people's pockets; this concept is a key component of what became known as Reaganomics. Government revenue declined by nearly 3% of GDP as a result of the Act. It is also called the Kemp-Roth Tax Cut after its two principal sponsors in Congress.


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During the early days of the Reagan Administration, a time plagued by slow economic growth, high interest rates, and runaway inflation, ERTA not only reduced tax rates, but established a powerful set of incentives to promote investment in income-producing "capital assets"--plant, property, and equipment--according to Brown.
Lindsey ranks taxpayers in different income fractiles before ERTA and again after ERTA.
After Congress approved ERTA in August 1981, budget deficits skyrocketed because of rising defense expenditures and lower revenues brought about by the 1981-1982 recession.
 
 
 
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