Tax Equity and Fiscal Responsibility Act of 1982

Tax Equity And Fiscal Responsibility Act Of 1982

Tax Equity and Fiscal Responsibility Act of 1982

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Description:
The Tax Equity and Fiscal Responsibility Act of 1982 (), also known as TEFRA, was a United States federal law that rescinded some of the effects of the Kemp-Roth Act passed the year before. As a result of ongoing recession, a short-term fall in tax revenue generated concern over the budget deficit. TEFRA was created in order to reduce the budget gap by generating revenue through closure of tax loopholes and introduction of tougher enforcement of tax rules, as opposed to changing marginal income tax rates. TEFRA was introduced November 13, 1981 and was sponsored by Representative Pete Stark of California. After much deliberation the final version was signed by President Ronald Reagan on September 3, 1982.

Summary of provisions

The Office of Tax Analysis of the United States Department of the Treasury summarized the tax changes as follows:
  • repealed scheduled increases in accelerated depreciation deductions
  • tightened safe harbor leasing rules
  • required taxpayers to reduce basis by 50% of investment tax credit
  • instituted 10% withholding on dividends and interest paid to individuals
  • tightened completed contract accounting rules
  • increased FUTA wage base and tax rate
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Effects and controversies

The scheduled increases in accelerated depreciation deductions were repealed, a 10 percent withholding on dividends and interest paid to individuals was instituted, and the Federal......
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