Economic Recovery Tax Act Of 1981 - ERTA

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. Tax Equity And Fiscal Responsibility ...

    Federal tax legislation passed in 1982 that modified some aspects ...
  2. Marginal Tax Rate

    The amount of tax paid on an additional dollar of income. The ...
  3. Tax Bracket

    The rate at which an individual is taxed. Tax brackets are set ...
  4. Bracket Creep

    A situation where inflation pushes income into higher tax brackets. ...
  5. Federal Tax Brackets

    Income tax groupings specified by the Internal Revenue Service ...
  6. Flat Tax

    A system that applies the same tax rate to every taxpayer regardless ...
Related Articles
  1. Personal Finance

    Why Your Tax Bracket Is Not the Tax Rate You Pay

    Understanding how federal and state tax brackets work is important for tax planning – and for making sense of the political conversation around tax reform.
  2. Personal Finance

    How Are Capital Gains And Dividends Taxed Differently?

    Individuals in the 25% or higher tax bracket pay a 20% tax on long-term capital gains.
  3. Personal Finance

    What's a Marginal Tax Rate?

    The marginal tax rate is based on a progressive tax system, where tax rates for an individual will increase as income rises. This method of taxation aims to fairly tax individuals based upon ...
  4. Personal Finance

    Comparing Long-Term vs. Short-Term Capital Gain Tax Rates

    Learn about the difference between short- and long-term capital gains and how the duration of your investment can impact your tax liability.
  5. Personal Finance

    3 Federal Income Tax Facts You Didn't Know

    Learn about three federal income tax facts that most Americans may not know from one of the most trusted financial resources on the Web.
  6. Personal Finance

    Explaining Progressive Tax

    A progressive tax is a levy in a tax system where the tax rate increases as the taxable base increases.
  7. Personal Finance

    Paying Uncle Sam: From Tobacco To $1 Trillion

    The services we rely on, like education, law and security, were built on taxes.
  8. Personal Finance

    How Will Raising Taxes on the 1% Make a Difference?

    What would happen if taxes were raised (even by a small degree) on the highest earners?
  9. Managing Wealth

    5 Ways to Reduce Your Taxes After a Windfall Gain

    Windfall income is a welcome padding to any bank account, but plan for the government's share before you start spending.
  10. Personal Finance

    Understanding Income Tax

    Income tax is a levy many governments place on revenue of entities within their jurisdiction.
RELATED FAQS
  1. If I have 5 tax years before I must take an RMD, how much tax benefit will it be ...

    My effective tax bracket for 2016 is 1.28% due to being retired with only pension and SS income.  ... Read Answer >>
  2. Are tax brackets adjusted for inflation?

    Learn about U.S. tax brackets and how the U.S. Internal Revenue Service (IRS) makes annual inflation-based adjustments for ... Read Answer >>
  3. How can I find out which income tax bracket I am in?

    Find out how to determine your federal income tax bracket and calculate how much you will owe in federal taxes with online ... Read Answer >>
  4. Can moving to a higher tax bracket cause me to have a lower net income?

    Many people think that when their income increases by enough to push them into a higher tax bracket, their overall take-home ... Read Answer >>
  5. How do I find out what my tax bracket is?

    Learn the information you need to determine what your tax bracket is. Read Answer >>
  6. What's the difference between a tax rate and a tax bracket?

    These two terms are often incorrectly used interchangeably. Find out the difference between your tax rate and your tax bracket. ... Read Answer >>
Hot Definitions
  1. AAA

    The highest possible rating assigned to the bonds of an issuer by credit rating agencies. An issuer that is rated AAA has ...
  2. GBP

    The abbreviation for the British pound sterling, the official currency of the United Kingdom, the British Overseas Territories ...
  3. Diversification

    A risk management technique that mixes a wide variety of investments within a portfolio. The rationale behind this technique ...
  4. European Union - EU

    A group of European countries that participates in the world economy as one economic unit and operates under one official ...
  5. Sell-Off

    The rapid selling of securities, such as stocks, bonds and commodities. The increase in supply leads to a decline in the ...
  6. Brazil, Russia, India And China - BRIC

    An acronym for the economies of Brazil, Russia, India and China combined. It has been speculated that by 2050 these four ...
Trading Center