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REAGANOMICS, 90, unnamed-3, Sr_monopoly_vota, 10821, CleanClipping…
REAGANOMICS
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IMMEDIATE ACTION:
Reagan's domestic policy were a movement away from the New deal philosophy that the government should borrow as much as it needed.
Reagan wanted to control government spending, cut taxes and drive the economy with supply-side theories
In the first three days after his inauguration he made marginal changes to decrease the costs in the Whitehouse.
-He sacked an array of Whitehouse staff and put a freeze on hiring.
-He decreased spending for office and furnishing equipment.
-He asked whitehouse staff to decrease spending by 15%.
-He set up advisory groups that reported directly to him how to decrease big government.
Whilst this immediate action showed initiative: the reductions in costs were small and advisory groups did not make changes.
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Reducing the federal deficit: In 1981 the federal deficit was 23% of GNP and in 1986 it was 19% if GNP.
Personal and business tax reductions: Economic recovery Tax act 1981 (ERTA) which decreased the marginal tax rate by 23% over 3 years and linked the tax bands to inflation
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It was the first time there was a republican majority in the Senate and almost a republican majority in the HOP.
This meant that the administration only had to get the approval of 26 democrats, this made getting bills through easier.
The senate passed the budget and after some revision it became (ORA) Omnibus Reconciliation Act 1981.
Getting tax legislation through was harder as the reduction in tax was decreased from 30% to 25%. This is because the Democrats felt that they had been manipulated by the budget and it was a way to retain control.
(ORA) was later revised and changed by (ERTA). 1981
-This decreased the marginal tax rate by 23% over 3 years and linked the tax brackets to inflation.
-The highest tax bracket decreased from 70% to 50%
-Working tax payers could set up IRAS which allowed them to deposit money tax free.
-ORA (OMNIBUS RECONCILIATION ACT) 1981- Proposed cuts in government spending that would save 35 Billion dollars
ERTA (ECONOMIC RECOVERY TAX ACT) 1981-
-Decreased marginal tax by 23% over three years.
-Reduced top tax band from 70 to 50%
-Allowed working taxpayers to have tax free in an IRA.
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1986 revises the 1981 budget to find ways to cut government spending: moves healthcare costs from federal government to employer.
1986 Tax reform act, reforms the tax codes reducing the number of tax brackets to close the tax evasion loopholes.
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