IESET.
Policies·us_tra_1986

Tra 1986

USA·1981 1986candidate
movestax progressivitytax corporatespending level

What the policy did

The Tax Reform Act of 1986 collapsed the federal individual income tax bracket structure to two rates (15 and 28 percent), broadened the base by curtailing tax shelters and passive-loss deductions, lowered the top corporate rate from 46 to 34 percent, and equalised treatment of ordinary and capital gains income. Designed as a revenue-neutral simplification, it was the signature bipartisan tax reform of the Reagan era and was preceded by the 1981 ERTA rate cuts.

Policy-content fingerprint — what this policy moved, on which axes

Per invariant 3, reforms are scored by what they did on each channel-separated axis, not by the party that enacted them. This fingerprint is how the policy-match engine finds historical analogues.

intended
tax progressivity
fiscal.tax_progressivity
Progressivity of the personal income tax schedule, including top marginal rates, bracket spread, and targeted credits (EITC-equivalents).
decreased · weak
less progressive (flatter rates, compression, smaller credits)
Top marginal individual rate dropped from 50 to 28 percent, compressing the bracket structure substantially.
tax corporate
fiscal.tax_corporate
Statutory and effective corporate tax rates, treatment of depreciation, and international competitiveness.
decreased · weak
lower corporate tax burden
Top corporate rate cut from 46 to 34 percent alongside repeal of the investment tax credit.
spending level
fiscal.spending_level
General government spending as share of GDP, excluding transfers already captured under fiscal.transfer_expansion to avoid double-counting.
increased · weak
higher spending share
Reagan-era defense buildup expanded outlays even as tax cuts narrowed the revenue base.

Enacted by

Empirical evidence — linked hypotheses

Explicit links are curated by the author. Inferred links are hypotheses in the library that test the same axes this policy moved — the framework's answer to "what does the data say about a policy like this?".

Countries in the top quartile of Heritage lower-tax-burden score in 2024 have lower latest-available extreme-poverty headcount than bottom-quartile countries, consistent with free-market country policy regimes outperforming less market-oriented regimes on this outcome.
heritage_tax_burden_extreme_poverty_current_gapinferred
viafiscal.tax_progressivityfiscal.spending_levelfiscal.tax_corporate
PARTIAL — gap sign/magnitude not decisive (diff=1.296, p=0.7399)
partial
Conditional on latest real GDP per capita and broad Heritage region, countries with higher Heritage lower-tax-burden score in 2024 have lower latest-available extreme-poverty headcount.
heritage_tax_burden_extreme_poverty_income_region_robustnessinferred
viafiscal.tax_progressivityfiscal.spending_levelfiscal.tax_corporate
PARTIAL — controlled coefficient not decisive (coef=-1.28, p=0.2307)
partial
Large welfare states sustain long-run real GDP per capita growth when paired with market flexibility (low product- and labour-market barriers), trade openness, and fiscal discipline (debt-to-GDP below 90%), but not when paired with rigid product and labour markets, in an OECD and rich- country panel 1980-2020.
welfare_state_market_flexibility_complementinferred
viafiscal.spending_level
PARTIAL — coef=+3.308e-18, p=0.653; effect magnitude effectively zero
partial
Conditional on latest real GDP per capita and broad Heritage region, countries with higher Heritage lower-tax-burden score in 2024 have higher latest-available account ownership.
heritage_tax_burden_account_ownership_income_region_robustnessinferred
viafiscal.tax_progressivityfiscal.spending_levelfiscal.tax_corporate
REFUTED — controlled market-score coefficient has opposite sign and p=0.01161
refuted
Conditional on latest real GDP per capita and broad Heritage region, countries with higher Heritage lower-tax-burden score in 2024 have higher latest-available employment rate.
heritage_tax_burden_employment_rate_income_region_robustnessinferred
viafiscal.tax_progressivityfiscal.spending_levelfiscal.tax_corporate
PARTIAL — controlled coefficient not decisive (coef=0.8483, p=0.3826)
partial
Conditional on latest real GDP per capita and broad Heritage region, countries with higher Heritage lower-tax-burden score in 2024 have higher latest-available female labour-force participation.
heritage_tax_burden_female_lfp_income_region_robustnessinferred
viafiscal.tax_progressivityfiscal.spending_levelfiscal.tax_corporate
PARTIAL — controlled coefficient not decisive (coef=-0.03732, p=0.9727)
partial
Countries in the top quartile of Heritage lower-tax-burden score in 2024 have higher latest-available real GDP per capita PPP than bottom-quartile countries, consistent with free-market country policy regimes outperforming less market-oriented regimes on this outcome.
heritage_tax_burden_gdp_pc_ppp_current_gapinferred
viafiscal.tax_progressivityfiscal.spending_levelfiscal.tax_corporate
PARTIAL — gap sign/magnitude not decisive (diff=-9554, p=0.1259)
partial
Countries in the top quartile of Heritage lower-tax-burden score in 2024 have higher latest-available high-technology export share than bottom-quartile countries, consistent with free-market country policy regimes outperforming less market-oriented regimes on this outcome.
heritage_tax_burden_high_tech_exports_current_gapinferred
viafiscal.tax_progressivityfiscal.spending_levelfiscal.tax_corporate
REFUTED — top-vs-bottom gap has opposite sign and Welch p=0.009281
refuted

Similar historical policies

Ranked by axis-fingerprint overlap with this policy. Direction match bolded — those are the closest historical analogues. Shape of the match is what drives policy-outcome comparison, not the country or party label.