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

    Is a Recession Coming?

    In the space of a week, the VIX Index, a measure of market volatility, spiked from 13, suggesting extreme complacency, to over 50, evidencing total panic.
  6. Forex

    The Pros and Cons of a Fully Convertible Rupee

    Amid the rising economic power of India, the talks of making the Indian currency fully convertible are gaining momentum. We look at the pros and cons.
  7. Taxes

    What IRS Form 990 Tells About a Nonprofit

    Want a picture of an organization's activities? This annual form, open to the public, sums up everything from salaries paid to missions accomplished.
  8. Retirement

    The 3 Most Common 401k Rollover Mistakes

    No one is born knowing the tax rules for 401(k)s and IRAs, but only dummies, scaredy cats and suckers don't buckle down to learn them.
  9. Taxes

    Top Reasons to File Separately When Married

    Most of the time, it makes sense for couples to file their taxes jointly. Except for these possible exceptions...
  10. Taxes

    What IRS Form 1023 Is Used For

    To be treated as a tax-exempt organization, start by filling out this form.
RELATED FAQS
  1. Can I use my IRA savings to start my own savings?

    While there is no legal reason why you cannot withdraw funds from your IRA to start a traditional savings account, it is ... Read Full Answer >>
  2. 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 >>
  3. 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 >>
  4. 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 >>
  5. 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 >>
  6. 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 >>

You May Also Like

Hot Definitions
  1. Stock Market Crash

    A rapid and often unanticipated drop in stock prices. A stock market crash can be the result of major catastrophic events, ...
  2. Financial Crisis

    A situation in which the value of financial institutions or assets drops rapidly. A financial crisis is often associated ...
  3. Election Period

    The period of time during which an investor who owns an extendable or retractable bond must indicate to the issuer whether ...
  4. Shanghai Stock Exchange

    The largest stock exchange in mainland China, the Shanghai Stock Exchange is a nonprofit organization run by the China Securities ...
  5. Dead Cat Bounce

    A temporary recovery from a prolonged decline or bear market, followed by the continuation of the downtrend. A dead cat bounce ...
  6. Bear Market

    A market condition in which the prices of securities are falling, and widespread pessimism causes the negative sentiment ...
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!