Question of the Day
After the Reagan tax reforms of 1986 cut the top personal income tax rate from 50% to 28%, did average inflation-adjusted federal taxes per U.S. resident increase or decrease?
After the Reagan tax reforms of 1986, inflation-adjusted federal taxes per U.S. resident increased from an average of $7,279 in 1986, to $7,713 in 1987, $7,868 in 1988, and $8,054 in 1989. Reagan's 1986 tax reforms also cut the top corporate income tax rate from 46% to 34%, but tax collections still grew. This is because the economy performed well, and because these tax reforms eliminated numerous tax preferences that were used for social engineering and special interest subsidies. As a result, the average effective tax rate on the top 20% of taxpayers rose, while it stayed level for middle and upper-middle income households and decreased for lower-income households. Since that time, various Congresses and Presidents have enacted more than 150 tax preferences.