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 are the primary reasons stagflation is unlikely to re-occur in the United States?

    See why the type of stagflation of the 1970s is unlikely to re-occur in the United States, but why stagflation always remains ... Read Answer >>
  2. How does macroeconomics explain "stagflation"?

    Learn about stagflation: a macroeconomic term used to describe economic turmoil. It is a time of serious inflation, slow ... Read Answer >>
Related Articles
  1. Personal Finance

    7 Millionaire Myths

    Millionaires: tax-evading golfers that inherited their fortunes, right? You'll be surprised to find how average millionaires actually are.
  2. Insights

    Why Many Millionaires Don't Feel Rich

    Learn about the millionaire mindset, and how you can benefit from millionaire market moves.
  3. 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.
  4. 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.
  5. Financial Advisor

    6 Millionaire Traits That You Can Adopt

    The most successful people have more in common than just money. Find out what you can learn.
  6. 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.
  7. 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.
  8. Insights

    America Mints 1,700 New Millionaires PER DAY

    There are about 1,700 millionaires being made each day in the U.S., a new study shows.
  9. Financial Advisor

    What Millionaires Fear the Most

    How much is enough? Millionaires feel major stress over this question.
  10. 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.
RELATED TERMS
  1. Reaganomics

    A popular term used to refer to the economic policies of Ronald ...
  2. Paper Millionaire

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

    A law passed by the United States Congress to simplify the income ...
  4. Federal Income Tax

    A tax levied by the United States Internal Revenue Service (IRS) ...
  5. Stagflation

    A condition of slow economic growth and relatively high unemployment ...
  6. Effective Tax Rate

    The average rate at which an individual or corporation is taxed. ...
Hot Definitions
  1. Gross Margin

    A company's total sales revenue minus its cost of goods sold, divided by the total sales revenue, expressed as a percentage. ...
  2. Current Ratio

    The current ratio is a liquidity ratio measuring a company's ability to pay short-term and long-term obligations, also known ...
  3. SEC Form 13F

    A filing with the Securities and Exchange Commission (SEC), also known as the Information Required of Institutional Investment ...
  4. Quantitative Easing

    An unconventional monetary policy in which a central bank purchases private sector financial assets in order to lower interest ...
  5. Risk Averse

    A description of an investor who, when faced with two investments with a similar expected return (but different risks), will ...
  6. Indirect Tax

    A tax that increases the price of a good so that consumers are actually paying the tax by paying more for the products. An ...
Trading Center