Tax Equity and Fiscal Responsibility Act of: What You Need to Know

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Tax Equity and Fiscal Responsibility Act of: What You Need to Know

Tax Equity and Fiscal Responsibility Act of: What You Need to Know

The Tax Equity and Fiscal Responsibility Act (TEFRA) is a United States federal law that was enacted in 1982. It was designed to address the growing budget deficit and promote fiscal responsibility. TEFRA made significant changes to the tax code and had a wide-ranging impact on individuals, businesses, and the economy as a whole.

TEFRA also made changes to the tax treatment of capital gains and introduced new rules for depreciation. It eliminated certain tax shelters and imposed stricter penalties for tax evasion and fraud. Additionally, TEFRA increased the tax rate for corporations and high-income individuals, further contributing to deficit reduction efforts.

Another important aspect of TEFRA was its impact on Social Security. The law increased the payroll tax rate for employees and employers, providing additional funding for the Social Security program. This was done to address the long-term solvency of Social Security and ensure that future generations would continue to receive benefits.

Overview of the Tax Equity and Fiscal Responsibility Act

The Tax Equity and Fiscal Responsibility Act (TEFRA) is a United States federal law enacted in 1982. It was designed to address the growing budget deficit and implement tax reforms to promote fiscal responsibility.

In addition to the AMT, TEFRA also implemented reforms in the corporate tax system. It reduced the maximum corporate tax rate from 46% to 34% over a period of three years, making the United States more competitive in the global market. TEFRA also eliminated certain tax shelters and loopholes that allowed corporations to avoid paying their fair share of taxes.

TEFRA also made changes to the individual tax system. It expanded the Earned Income Tax Credit (EITC), which provides a refundable tax credit to low-income working individuals and families. The act also introduced limitations on certain deductions and increased the tax rates for high-income individuals.

Furthermore, TEFRA implemented reforms in the Social Security system. It increased the payroll tax rate and raised the retirement age to ensure the long-term sustainability of the program. These changes were aimed at addressing the growing deficit in the Social Security Trust Fund.

Overall, the Tax Equity and Fiscal Responsibility Act of 1982 was a comprehensive tax reform that aimed to promote fiscal responsibility and address the budget deficit. It introduced significant changes to the tax code, affecting both individuals and businesses, and implemented reforms in the corporate and Social Security systems. TEFRA played a crucial role in shaping the modern U.S. tax system and continues to have an impact on tax policy to this day.