Economic Recovery

federal law enacted in 1981 that cut taxes across-the-board, modified the depreciation tables used by businesses in writing off capital equipment, and indexed tax brackets to the inflation rate. The act reduced the individual tax rate by 23%, cut the corporate capital gains tax to a maximum of 20%, and introduced the accelerated cost recovery system used by businesses in calculating accelerated depreciation.

To encourage individual savings, the act made Individual Retirement Account (IRA) available to anyone earning regular income, and introduced the all savers certificate, a one-year savings certificate free of federal taxes. (IRA eligibility rules have since been modified substantially by the tax reform act of 1986, eliminating the tax deduction for IRA contributions of individuals covered by a corporate pension who earn over a specified amount.)

The act also reduced the federal tax on estate and gift taxes, making the first $600,000 tax free after 1987, and allowed an unlimited marital deduction on property transfers as provided by a will.