Tax Equity and Fiscal Responsibility Act of 1982
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| Long title | An act to provide for tax equity and fiscal responsibility, and for other purposes. |
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| Enacted by | the 97th United States Congress |
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| Public law | 97-248 |
| Statutes at Large | 96 Stat. 324 |
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The Tax Equity and Fiscal Responsibility Act of 1982 (Pub.L. 97–248), also known as TEFRA, is a United States federal law that rescinded some of the effects of the Kemp-Roth Act passed the year before. Between summer 1981 and summer 1982, tax revenue fell by about 6% in real terms, caused by the dual effects of the economy dipping back into recession (the second dip of the "double dip recession") and Kemp-Roth's reduction in tax rates, and the deficit was likewise rising rapidly because of the fall in revenue, and the rise in government expenditures (largely debt service and defense spending). The rapid rise in the budget deficit created concern among many in Congress. TEFRA was created in order to reduce the budget gap by generating revenue through closure of tax loopholes, introduction of tougher enforcement of tax rules, rescinding some of Kemp-Roth's reductions in marginal personal income tax rates that had not yet gone into effect, and raising some rates, especially corporate 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.
The Act includes certain provisions related to the US Health Care System. The Act:
The Office of Tax Analysis of the United States Department of the Treasury summarized the tax changes as follows:
The scheduled increases in accelerated depreciation deductions were repealed, a 10 percent withholding on dividends and interest paid to individuals was instituted, and the Federal Unemployment Tax Act wage base and tax rate were increased. Excise taxes on cigarettes were temporarily doubled, and excise taxes on telephone service temporarily tripled, in TEFRA.
President of the United States Ronald Reagan agreed to the tax hikes on the promise from Congress of a $3 reduction in spending for every $1 increase in taxes. Some conservatives, led by then-Congressman Jack Kemp, claim that the promised spending reductions never occurred. One week after TEFRA was signed, H.R. 6863 – the Supplemental Appropriations Act of 1982 which Ronald Reagan claimed would "bust the budget" was passed by both houses of Congress over his veto. Four years later, then-budget director , however, stated that Congress substantially upheld its end of the bargain, and cites the Administration's failure to identify management savings and its resistance to defense spending cuts as the key impediments to greater outlay savings.
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