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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

and audit volumes increased dramatically why?

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

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

obligations luckily this tax reform act clarified and finalized resource

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

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

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

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