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.

INVESTOPEDIA EXPLAINS '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. Statutory Accounting Principles ...

    A set of accounting regulations prescribed by the National Association ...
  2. Bracket Creep

    A situation where inflation pushes income into higher tax brackets. ...
  3. Accelerated Cost Recovery System ...

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

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

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

    1. The adjustment of the weights of assets in an investment portfolio ...
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. Investigate these expat havens if you seek a developed country with low barriers for getting a permanent resident visa – sometimes even citizenship.
    Personal Finance

    5 Developed Countries That Welcome Expats

    Investigate these expat havens if you seek a developed country with low barriers for getting a permanent resident visa – sometimes even citizenship.
  6. Free enterprise is the economic term used to describe an economy with very little government ownership.
    Economics

    What's Free Enterprise?

    Free enterprise is the economic term used to describe an economy with very little government ownership or regulation. In a free enterprise system, competition and the preferences and choices ...
  7. Some countries put up very high barriers for foreigners to get citizenship
    Personal Finance

    5 Countries Where It's Hardest To Become A Citizen

    The United States is one of five countries that put up very high barriers for foreigners to get citizenship. Here's how it compares to the other four.
  8. Depending on their parents, people not born in the U.S. either inherit U.S. citizenship or need to achieve it. Here are the steps to become an American.
    Personal Finance

    How To Become A U.S. Citizen

    Depending on their parents, people not born in the U.S. either inherit U.S. citizenship or need to achieve it. Here are the steps to become an American.
  9. The law of supply and demand is one of the most basic principles in economics.
    Economics

    What is Supply & Demand?

    The law of supply and demand is one of the most basic principles in economics. In simplest terms, the law of supply and demand states that when an item is scarce, but many people want it, the ...
  10. The Affordable Care Act is the largest change to the tax code in 20 years that could affect you when you file that 2014 tax return next year.
    Taxes

    How Might The Affordable Care Act Affect You?

    The Affordable Care Act is the largest change to the tax code in 20 years that could affect you when you file that 2014 tax return next year.

You May Also Like

Hot Definitions
  1. Santa Claus Rally

    A surge in the price of stocks that often occurs in the week between Christmas and New Year's Day. There are numerous explanations ...
  2. Commodity

    1. A basic good used in commerce that is interchangeable with other commodities of the same type. Commodities are most often ...
  3. Deferred Revenue

    Advance payments or unearned revenue, recorded on the recipient's balance sheet as a liability, until the services have been ...
  4. Multinational Corporation - MNC

    A corporation that has its facilities and other assets in at least one country other than its home country. Such companies ...
  5. SWOT Analysis

    A tool that identifies the strengths, weaknesses, opportunities and threats of an organization. Specifically, SWOT is a basic, ...
  6. Simple Interest

    A quick method of calculating the interest charge on a loan. Simple interest is determined by multiplying the interest rate ...
Trading Center