ShmoopTube

00:00

Finance a la shmoop what is the Tax Reform Act of 1986 ah it was a simpler

00:10

time Democrats and Republicans working [Politicians jumping up and down]

00:13

together shaking hands across the aisle then sharing mistresses well the tax

00:18

reform act of 86 was the on-court - the act of 81 wherein Ronald Reagan moved to [Reagan appears]

00:24

dramatically simplify tax codes he cut taxes but somehow these cuts were to be

00:30

revenue-neutral to the taxman and go figure that one like cutting taxes would [Revenue forms cut in half]

00:34

stimulate business which it did which then generates more income which is then

00:39

taxed more something like that that's the logic anyway well a big theme of

00:43

these tax cuts was to shift the burden from individuals paying very high

00:47

marginal tax rates Thank You comrade Jimmy Carter to corporations many of [Jimmy Carter in office]

00:53

which had found loopholes so that billions of dollars were avoided in

00:56

paying taxes kind of like today's Apple and Google basing themselves in Ireland

01:01

and individuals paid with their liver and lungs in those days comrade Carter [Man holding liver at hospital desk]

01:06

had imposed a 50% plus top rate which kicked in at a relatively low dollar

01:11

level like you were wealthy if you earned more than a hundred grand a year

01:14

today's dollar adjusted Reagan brought that top rate down to 38 percent on its [Man bumps into Reagan]

01:19

way over time down to 28% and consolidated 15 different break points

01:24

in tax to being just four and yes the people at H&R Block wept they'd had it

01:30

great with the complex Carter era accounting gravy train there well a ton [Person dealing cash]

01:35

of other things were simplified and codified with the theme being that the

01:38

new IRS was gonna go after you if you didn't pay up it's like they're cutting [Woman running in woods screaming]

01:44

your fees so you better at least pay the low rates here these days on taxes yeah

01:48

and audit volumes increased dramatically why?

01:52

well since taxes were now so much easier to pay you'd better stop finding lies in

01:58

trickery and other deceitful ways to avoid paying you're legally owed

02:02

obligations luckily this tax reform act clarified and finalized resource

02:06

allocation debates as driven by taxes forever so that after 1986 while there

02:12

were no more debate about tax changes and everything from [Red siren alarm appears]

02:16

there forward for the next few hundred years won't need to change a lick oh

02:20

wait actually the opposite is happening always [Politicians boxing each other]

Full Transcript