Tax-cutting legislation. Among the key provisions:
1. Across-the-board tax cut, which took effect in three stages ending in 1983.
2. Indexing of tax brackets to the inflation rate.
3. Lowering of top tax rates on long-term capital gains from 28% to 20%. The top rate on dividends, interest, rents, and royalties income dropped from 70% to 50%.
4. Lowering of Marriage Penalty tax, as families with two working spouses could deduct 10% from the salary of the lower-paid spouse, up to $3,000.
5. Expansion of Individual Retirement Arrangements to all working people, who can contribute up to $2,000 a year, and $250 annually for nonworking spouses. Also, expansion of the amount self-employed people can contribute to Keogh Plan account contributions.
6. Creation of the all-savers certificate, which allowed investors to exempt up to $1,000 a year in earned interest. The authority to issue these certificates expired at the end of 1982.
7. Deductions for reinvesting public utility dividends.
8. Reductions in estate and gift taxes, phased in so that the first $600,000 of property can be given free of estate tax starting in 1987. Annual gifts that can be given free of gift tax were raised from $3,000 to $10,000. Unlimited deduction for transfer of property to a spouse at death.
9. Lowering of rates on the exercise of stock options.
10. Change in rules on Depreciation and Investment Credit.
See also Tax Reform Act of 1986.
