3 Pages Posted: 17 Oct 2011
Date Written: October 17, 2011
This article reviews the impact of the Tax Reform Act of 1986 after 25 years. While there are many ways that TRA 1986 has permanently altered the structure of federal taxation, it is hard to find ways in which it changed anything real in terms of economic growth, employment, or productivity. Rather, the impact has been largely confined to the behavioral realm, changing things like the timing of capital gains realizations, the nature of business organizations, and the ways consumers borrow. While these are important for administrative and revenue reasons, they fall far short of having the macroeconomic impact that was widely anticipated when TRA 1986 was enacted. Nor did the legislation have much lasting effect on thinking about tax policy, either among economists or legal scholars. The principal long-term effects of TRA 1986 has been on politics.
Keywords: Tax Reform Act of 1986, income tax, tax expenditures
JEL Classification: H20, K34
Suggested Citation: Suggested Citation