The Tax Reform Act of 1986

Abstract

This article (1) evaluates The Tax Reform Act of 1986 (TRA) in terms of tax reform criteria; (2) analyzes the historical importance of TRA relative to earlier reform and nonreform tax legislation; and (3) poses three different explanatory models for why this historic tax bill was enacted. The author argues that the 1986 legislation was not only major tax reform, but a radical departure from the usual standards of incremental tax legislation. Of the three explanatory models, the author argues that it is most likely that the act is a combination of epiphenomenal events and reactive legislation, than a true watershed indicating a long-term change of direction in tax policy. The final section of the article summarizes the lessons learned from 1986 and outlines the importance of the various explanations for understanding current congressional behavior on fiscal policy.