What is the Tax Reform Act Of 1993
The Tax Reform Act of 1993 was legislation aimed at reducing the federal deficit through a combination of increased taxes and reduced spending.
BREAKING DOWN Tax Reform Act Of 1993
The Clinton Administration created the Tax Reform Act in 1993 to contain several major provisions for individuals, such as the addition of the 36 percent tax bracket, an increase in gasoline taxes and an additional tax of 10 percent on married couples with income above $250,000. It also raised taxation on Social Security benefits and eliminated the tax cap on Medicare. The Tax Reform Act was one of President Clinton’s first tax packages and it led to a lot of significant changes in tax law for both individuals and businesses.
The Tax Reform Act of 1993 was a piece of legislation is also known as the Revenue Reconciliation Act of 1993. Individuals were not the only ones affected by this legislation. For instance, the corporate tax rate was raised as well, along with a lengthening of the goodwill depreciation period and the elimination of deductibility for congressional lobbying expenses. Many other taxes were raised and deductions reduced or eliminated as well. The Act was also one of the first bills to retroactively raise the tax rate, effectively making the increased tax rates law for taxpayers for the beginning of the year, despite the fact that the act was signed into law on August 10.
Specifics of the Tax Reform Act of 1993
The Tax Reform Act of 1993 contained several special provisions and focuses on areas such as education, small businesses, energy and depreciation adjustments. Some of the provisions in the bill included:
- Education and training. The Tax Reform Act of 1993 made tax-exclusions of employer-provided educational assistance permanent after June 30, 1992. It also allowed targeted job credit to incentivize hiring qualified participants in school-to-work programs.
- Small business. The act gave small businesses regular tax credit of five percent of their qualified investment in depreciable property. The credit also offset a percentage of the minimum tax and allowed a taxpayer that is not a corporation to exclude 50 percent of the gain of a sale of a small business stock held for more than five years from their gross income.
- Business deductions. One piece of the act that remains in effect today is the reduction of business deductions for meals and entertainment from 80 percent to only 50 percent.