A:

When Ronald Reagan took office in 1981, he brought in an agenda to try and clear the remnants of stagflation that plagued the nation in the 1970s. His strategy, referred to as Reaganomics, was to reduce taxes and government spending in order to free up more private capital for investment in the economy. Regan followed through on his campaign promises and lowered federal taxes with the Economic Recovery Tax Act of 1981. There were broad tax cuts, but the most significant tax impact was felt in the top personal tax bracket where tax rates dropped by over half.

This sudden relief from taxes pushed many of the marginally wealthy into a net worth of millions. The extended economic boom that followed catapulted even more Americans into millionaire status. On March 8, 1985, the IRS announced that there were over 400,000 American millionaires, double the number before Regan took office.

Unfortunately, Reagan was unable to keep to his reduction in government spending or make any significant reduction in the size of government. During the same period as the millionaire boom was taking place, the nation's debt was ballooning and the gap between the rich and poor grew substantially. When Reagan left office, the new president, George H. Bush, raised taxes again to make up government shortfalls. The next millionaire boom came with the internet bubble and many of the new millionaires were paper millionaires only for a brief time before the market crashed.

Check out our related article, 10 Steps To Retire A Millionaire.

This question was answered by Andrew Beattie.

RELATED FAQS
  1. What's the difference between the marginal tax rate system and a flat tax?

    Find out about the difference between marginal tax rates and flat taxes. Gain insights on both systems and the arguments ... Read Answer >>
  2. How does the effective tax rate for an individual differ from that of a corporation?

    Read about the effective tax rate for individuals when compared with the effective tax rate for corporations, including how ... Read Answer >>
  3. Is progressive tax the same thing as marginal tax rate?

    Learn how a marginal tax rate is a form of a progressive tax rate. Learn the pros and cons of such a tax policy and who may ... Read Answer >>
  4. Who first came up with the idea of a progressive tax?

    Learn how the progressive income tax system developed in the United States and became the federal government's primary revenue ... Read Answer >>
  5. What is the difference between a write-off and a deduction?

    Understand the differences between a tax write-off and a tax deduction. Learn how each one works to reduce income taxes and ... Read Answer >>
Related Articles
  1. Personal Finance

    6 Millionaire Traits That You Can Adopt

    Millionaires have more in common than just their bank accounts. They share certain qualities that help them make it to the top.
  2. Investing

    How to Invest Like a Millionaire in 2016

    Discover how to start 2016 strong by learning how to imitate the investing strategies that distinguish millionaire investors from most average investors.
  3. Managing Wealth

    Why Some Millionaires Have the Middle-Class Blues

    Recent studies show that a large percentage of U.S. millionaires classify themselves as middle class. Here's why.
  4. Financial Advisor

    Millionaire Households Reach Record High in U.S.

    Millionaire households in the U.S. reached a record high in 2015, a recent study by Spectrem Group has found.
  5. Managing Wealth

    The Great Millionaire Migration

    According to a recent report from New World Wealth, a number of countries around the world are losing millionaires.
  6. Investing

    Asian Millionaires Are the Richest in the World

    A new study finds that not only are there more millionaires in Asia versus the rest of the world but they have more money as well.
  7. Financial Advisor

    What Millionaires Fear the Most

    How much is enough? Millionaires feel major stress over this question.
  8. Financial Advisor

    5 Top Ranked Cities for Millionaires

    When it comes to the number of millionaires as a percentage of overall population, Europe calls itself home to a large portion of the luxury-seeking class.
  9. Managing Wealth

    Should You Follow Millionaires into this Sector? (XLF, XLK)

    Millionaire investors—and those who follow them—should take another look at the current economic situation before making any more investment decisions.
  10. Financial Advisor

    Why Millionaires are Running Scared

    Most millionaires don't identify as rich and worry about maintaining their wealth. Here's why.
RELATED TERMS
  1. Reaganomics

    A popular term used to refer to the economic policies of Ronald ...
  2. Voodoo Economics

    A slanderous term used by George H. W. Bush in reference to President ...
  3. Paper Millionaire

    An individual who has achieved a high net worth as a result of ...
  4. Tax Reform Act Of 1986

    A law passed by the United States Congress to simplify the income ...
  5. Effective Tax Rate

    The average rate at which an individual or corporation is taxed. ...
  6. Direct Tax

    A tax that is paid directly by an individual or organization ...
Hot Definitions
  1. Federal Direct Loan Program

    A program that provides low-interest loans to postsecondary students and their parents. The William D. Ford Federal Direct ...
  2. Cash Flow

    The net amount of cash and cash-equivalents moving into and out of a business. Positive cash flow indicates that a company's ...
  3. PLUS Loan

    A low-cost student loan offered to parents of students currently enrolled in post-secondary education. With a PLUS Loan, ...
  4. Graduate Record Examination - GRE

    A standardized exam used to measure one's aptitude for abstract thinking in the areas of analytical writing, mathematics ...
  5. Graduate Management Admission Test - GMAT

    A standardized test intended to measure a test taker's aptitude in mathematics and the English language. The GMAT is most ...
  6. Magna Cum Laude

    An academic level of distinction used by educational institutions to signify an academic degree which was received "with ...
Trading Center