Economic Recovery Tax Act Of 1981 - ERTA

AAA

DEFINITION of 'Economic Recovery Tax Act Of 1981 - ERTA'

A law that lowered income tax rates and allowed for expensing of depreciable assets. The Economic Recovery Tax Act of 1981 (ERTA) also included several incentives for small business and incentives for saving. The ERTA also provided for automatic adjustment of tax brackets, and indexing for inflation because inflation increased nominal income and pushed taxpayers into higher and higher tax brackets.

BREAKING DOWN 'Economic Recovery Tax Act Of 1981 - ERTA'

The effect of indexing is to expose a smaller portion of income to taxation. Without indexing, inflation would give the government a larger tax windfall. The lower income and middle class workers were most affected by inflation caused tax increases. They were the most hurt by the increasing tax brackets.

RELATED TERMS
  1. Accelerated Cost Recovery System ...

    A system of depreciation introduced by the Economic Recovery ...
  2. Flat Tax

    A system that applies the same tax rate to every taxpayer regardless ...
  3. Income Tax

    A tax that governments impose on financial income generated by ...
  4. Indexing

    1. The adjustment of the weights of assets in an investment portfolio ...
  5. Tax Bracket

    The rate at which an individual is taxed. Tax brackets are set ...
  6. Taxable Income

    The amount of income that is used to calculate an individual's ...
Related Articles
  1. Insurance

    Talk Is Cheap: Campaign Promises And The Economy

    A president's campaign trail promises often come up against economic reality.
  2. Taxes

    Spoil Your Grandkids, Cut Your Tax Bill

    Helping your grandchildren save for college is a way to spoil them and reap some benefits yourself.
  3. Taxes

    Do Tax Cuts Stimulate The Economy?

    Learn the logic behind the belief that reducing government income benefits everyone.
  4. Taxes

    Capital Gains Tax Cuts For Middle Income Investors

    Find out how TIPRA plans to slash taxes for those in the 10-15% tax bracket.
  5. Economics

    Will North and South Korea Ever Reunite?

    North and South Korea have been divided for over six decades. Some analysts think the two countries could reunify within the next 10 years.
  6. Stock Analysis

    Benefits of Regional Bank ETFs over Commercial Banks

    The SPDR S&P Regional Banking ETF offers a stable local alternative to broad-based multinational commercial banking sector funds.
  7. Economics

    The Top 9 Things to Know About Hillary Clinton's Economic View

    Find out where former secretary of state and Democratic presidential candidate Hillary Clinton stands on the economy, jobs, trade and education.
  8. Economics

    Is Argentina a Socialist Country?

    Find out why it does not really make sense to call Argentina a socialist country, even though the South American nation has many socialistic tendencies.
  9. Professionals

    Holding Out for Capital Gains Could Be a Mistake

    Holding stocks for the sole purpose of avoiding short-term capital gains taxes may be a mistake, especially if all the signs say get out.
  10. Retirement

    How do you calculate penalties on a 401(k) early withdrawal?

    Find out how to calculate the penalties on early withdrawals from your 401(k), including the impact of the additional 10% tax penalty, vesting and income tax.
RELATED FAQS
  1. Are spousal Social Security benefits taxable?

    Your spousal Social Security benefits may be taxable, depending on your total household income for the year. About one-third ... Read Full Answer >>
  2. Where are the Social Security administration headquarters?

    The U.S. Social Security Administration, or SSA, is headquartered in Woodlawn, Maryland, a suburb just outside of Baltimore. ... Read Full Answer >>
  3. What is the Social Security tax rate?

    The Social Security tax rate is 12.4% as of 2015. Of that amount, the employee is responsible for half, or 6.2%, and the ... Read Full Answer >>
  4. What is the Social Security administration responsible for?

    The main responsibility of the U.S. Social Security Administration, or SSA, is overseeing the country's Social Security program. ... Read Full Answer >>
  5. How is Social Security tax calculated?

    The Old-Age, Survivors and Disability Insurance program, or OASDI, tax is calculated by taking a set percentage of your income ... Read Full Answer >>
  6. Is the Social Security administration a government corporation?

    The U.S. Social Security Administration (SSA) is a government agency, not a government corporation. President Franklin Roosevelt ... Read Full Answer >>

You May Also Like

Hot Definitions
  1. Tiger Cub Economies

    The four Southeast Asian economies of Indonesia, Malaysia, the Philippines and Thailand. Tiger cub economy indicates that ...
  2. Gorilla

    A company that dominates an industry without having a complete monopoly. A gorilla firm has large control of the pricing ...
  3. Elephants

    Slang for large institutions that have the funds to make high volumes trades. Due to the large volumes of stock that elephants ...
  4. Widow's Exemption

    In general terms, a widow's exemption refers to the amount that can be deducted from taxable income by a widow, thereby reducing ...
  5. Wedding Warrant

    A warrant that can only be exercised if the host asset, typically a bond or preferred stock, is surrendered. Until the call ...
  6. Marlboro Friday

    A reference to Friday, April 2, 1993, when Philip Morris, the maker of Marlboro cigarettes, announced that it would be cutting ...
Trading Center
×

You are using adblocking software

Want access to all of Investopedia? Add us to your “whitelist”
so you'll never miss a feature!