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. 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. Taxable Income

    The amount of income that is used to calculate an individual's ...
  6. Tax Bracket

    The rate at which an individual is taxed. Tax brackets are set ...
Related Articles
  1. Talk Is Cheap: Campaign Promises And ...
    Insurance

    Talk Is Cheap: Campaign Promises And ...

  2. Spoil Your Grandkids, Cut Your Tax Bill
    Taxes

    Spoil Your Grandkids, Cut Your Tax Bill

  3. Do Tax Cuts Stimulate The Economy?
    Taxes

    Do Tax Cuts Stimulate The Economy?

  4. Capital Gains Tax Cuts For Middle Income ...
    Taxes

    Capital Gains Tax Cuts For Middle Income ...

Hot Definitions
  1. Hyperinflation

    Extremely rapid or out of control inflation. There is no precise numerical definition to hyperinflation. Hyperinflation is ...
  2. Gross Rate Of Return

    The total rate of return on an investment before the deduction of any fees or expenses. The gross rate of return is quoted ...
  3. Debit Spread

    Two options with different market prices that an investor trades on the same underlying security. The higher priced option ...
  4. Leading Indicator

    A measurable economic factor that changes before the economy starts to follow a particular pattern or trend. Leading indicators ...
  5. Wage-Price Spiral

    A macroeconomic theory to explain the cause-and-effect relationship between rising wages and rising prices, or inflation. ...
  6. Accelerated Depreciation

    Any method of depreciation used for accounting or income tax purposes that allows greater deductions in the earlier years ...
Trading Center