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Kemp-Roth Tax Cut

From Academic Kids

The Kemp-Roth Tax Cut (officially the Economic Recovery Tax Act, or ERTA) of 1981 reduced marginal income tax rates in the United States by approximately 25% over three years (the top rate falling to 50% from 70% while the bottom rate dropped to 11% from 14%) and indexed them for inflation (though indexing was delayed until 1985). Its sponsors, Representative Jack Kemp and Senator William Roth, had hoped for more significant tax cuts.

Critics blame the tax cuts for the deficits in the budget of the United States government in the 1980s and early 1990s. Supporters credit them with helping the 1980s economic expansion. Supporters of the tax cuts also argue, using the Laffer curve, that the tax cuts increased government revenue. This is hotly disputed--critics contend that, although government income tax receipts did rise, it was due to economic growth not caused by the tax cuts, and would have risen more if the tax cuts had not occurred. Supporters see the growth as caused by the tax cuts. Controversy still remains as to whether the tax cuts of 1981 increased revenues.

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