Happy Anniversary Tax Reform Act of 1986

October 21, 2011

Tomorrow (October 22nd) marks the 25th anniversary of the enactment of the Tax Reform Act of 1986 which dramatically simplified the tax code while lowering tax rates for individuals and corporations.

Tax reform is once again the hot topic in Washington so I thought it would be interesting to see how some of the major tax, budget, and economic indicators today compare to the conditions in 1986.  

 Topic

1986

2011

President

Ronald Reagan (R )

Barack Obama (D)

Chairman of the Ways and Means Committee

Dan Rostenkowski (D-IL)

David Camp (R-MI)

Chairman of the Finance Committee

Robert Packwood (R-OR)

Max Baucus (D-MT)

Top corporate tax rate

46%

35%

Top individual tax rate

50%

35%

Income threshold for paying top rate (in 2011 dollars)

$358,782

$379,150

Share of income earned by the top 1% of filers

11.3%

16.9%

Share of taxes paid by the top 1% of filers

25.8%

36.7%

Average tax rate of the top 1% of filers

33.1%

24.0%

Share of income earned by the bottom 50% of filers

16.7%

13.5%

Share of taxes paid by the bottom 50% of filers

6.5%

2.3%

Average tax rate of the bottom 50% of filers

5.6%

1.8%

Number of tax brackets

15

6

Number of income tax filers

103,045,170

140,494,127

Number of filers with no income tax liability

19,077,757

58,603,938

Percent of filers with no income tax liability

18.5%

41.7%

Deficit as a percent of GDP

5.0%

8.7%

Deficit in billions of 2011 dollars

-$420

-$1,299

Federal Outlays as a percent of GDP

22.5%

24.1%

Federal Outlays in billions of 2011 dollars

                             $1,880

                        $3,601

Federal revenues as a percent of GDP

17.5%

15.4%

Federal revenues in 2011 dollars

                             $1,460

                        $2,302

Real GDP growth (2nd Quarter)

1.6%

1.3%

Unemployment rate (September)

7.0%

9.1%

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