The Tax Equity and Fiscal Responsibility Act of 1982 (Pub. L.Tooltip Public Law (United States) 97–248),[1] also known as TEFRA, is a United States federal law that rescinded some of the effects of the Kemp-Roth Act passed the year before.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. The rapid rise in the budget deficit created concern among many in Congress. TEFRA was created 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 US Representative Pete Stark of California. After much deliberation, the final version was signed by President Ronald Reagan on September 3, 1982.
Tax Equity and Fiscal Responsibility Act of 1982
Long title
An act to provide for tax equity and fiscal responsibility, and for other purposes.
Introduced in the House as H.R. 4961 by Pete Stark (D–CA) on November 13, 1981
Committee consideration by House Ways and Means, Senate Finance
Passed the House on December 15, 1981 (voice vote)
Passed the Senate on July 23, 1982 (50–47)
Reported by the joint conference committee on August 15, 1982; agreed to by the House on August 19, 1982 (226–207) and by the Senate on August 19, 1982 (52–47)
Signed into law by President Ronald Reagan on September 3, 1982
Established the provisions for utilization review as "reviews of the pattern of quality of care, in an area of medical practice where actual performance is measured against, objective criteria which define acceptable and adequate practice"[citation needed]
Established the Katie Beckett waiver (also called the TEFRA waiver), a Medicaid waiver concerning the income eligibility for home-based Medicaid services for children under the age of nineteen. It is also called a TEFRA waiver because it was passed as a provision of the Tax Equity and Fiscal Responsibility Act of 1982.
The Office of Tax Analysis of the United States Department of the Treasury summarized the tax changes as follows:[3]
repealed scheduled increases in accelerated depreciation deductions
tightened safe harbor leasing rules
required taxpayers to reduce basis by 50% of investment tax credit
instituted 10% withholding on dividends and interest paid to individuals
tightened completed contract accounting rules
increased FUTA wage base and tax rate
Effects and controversiesEdit
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.[4]
President of the United StatesRonald Reagan agreed to the tax hikes on the promise from Congress of a $3 reduction in spending for every $1 increase in taxes.[5] Some conservatives, led by then-Congressman Jack Kemp, claim that the promised spending reductions never occurred.[6] One week after TEFRA was signed, H.R. 6863 – the Supplemental Appropriations Act of 1982 which Ronald Reagan claimed would "bust the budget" [7] was passed by both houses of Congress over his veto.[8] Four years later, then-budget director David Stockman, 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.[6]
The original TEFRA bill as passed by the House would have lowered taxes.[9] The Republican-controlled Senate replaced the text of the original House bill with a number of tax increases, and the bill became law after President Ronald Reagan signed it.
A lawsuit was filed by an individual named Garrison R. Armstrong, claiming that TEFRA violated the Origination Clause in Article One of the United States Constitution which requires all revenue bills to originate in the House. The United States Court of Appeals for the Ninth Circuit ruled against Armstrong, saying: "We therefore conclude that the Senate did not exceed its authority under the origination clause when it proposed the extensive amendments that ultimately became TEFRA."[10]
In 1988, libertarian political writer Sheldon Richman described TEFRA as "the largest tax increase in American history." In 2003, former Reagan adviser Bruce Bartlett wrote in National Review that "TEFRA raised taxes by $37.5 billion per year", elaborating, "according to a recent Treasury Department study, TEFRA alone raised taxes by almost 1 percent of the gross domestic product, making it the largest peacetime tax increase in American history."[11] However, this "increase" was achieved primarily through the cancellation of future tax cuts scheduled by ERTA the year before that had yet to take effect at the time of TEFRA's passage.[12] Taxpayers still receive $375 billion in tax cuts in the 3 years following TEFRA.[12]
A chart from the United States Department of the Treasury study[3] showing the bill's effect on government revenues is reproduced below. As it shows, the TEFRA increased tax revenues by almost 1% (0.98%) of GDP, in marked contrast to the 1981 tax cuts and the milder effects of the other Reagan-era tax bills. The study makes note that these government revenue estimates do not take into account the effect of the bills on GDP, and therefore, are not inclusive of resulting increases in revenue that could occur from an increase in GDP:[3]
The bill also created a hospice benefit to the Medicare program for the terminally ill with a 1986 sunset provision. It allowed States to add a hospice benefit to the Medicaid program.
Revenue effects of major tax bills enacted under Reagan (as percentage of GDP)[3]
^Pub. L.Tooltip Public Law (United States) 97–248, 96 Stat. 324, enacted September 3, 1982
^Medicare Benefit Policy Manual Chapter 9 - Coverage of Hospice Services Under Hospital Insurance on cms.gov
^ abcdOffice of Tax Analysis (September 2006) [2003]. "Revenue Effects of Major Tax Bills" (PDF). United States Department of the Treasury. Working Paper 81, page 12. Retrieved 2009-07-18.
^Congressional Budget Office, "The Economic and Budget Outlook: Fiscal Years 1984–1988" (February 1983).
^"Policy Archive - A Digital Archive of Public Policy Research" (PDF).
^ abStockman, David A., "The Triumph of Politics: Why the Reagan Revolution Failed" (Harper and Row, 1986), pp. 368–369.
^[1] DEFICIT POLITICS AND DEMOCRATIC UNITY: THE SAGA OF TIP O’NEILL, JIM WRIGHT, AND The Conservative Democrats in the House of Representatives During the Reagan Era
^Bruce Bartlett (2003-10-29). "A Taxing Experience". National Review.
^ abJodie T. Allen (16 August 1996). "The Biggest Tax Increase in History". Slate.
October 24, 2023
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The Tax Equity and Fiscal Responsibility Act of 1982 Pub L Tooltip Public Law United States 97 248 1 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 The rapid rise in the budget deficit created concern among many in Congress TEFRA was created 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 US Representative Pete Stark of California After much deliberation the final version was signed by President Ronald Reagan on September 3 1982 Tax Equity and Fiscal Responsibility Act of 1982Long titleAn act to provide for tax equity and fiscal responsibility and for other purposes Acronyms colloquial TEFRAEnacted bythe 97th United States CongressCitationsPublic law97 248Statutes at Large96 Stat 324Legislative historyIntroduced in the House as H R 4961 by Pete Stark D CA on November 13 1981Committee consideration by House Ways and Means Senate FinancePassed the House on December 15 1981 voice vote Passed the Senate on July 23 1982 50 47 Reported by the joint conference committee on August 15 1982 agreed to by the House on August 19 1982 226 207 and by the Senate on August 19 1982 52 47 Signed into law by President Ronald Reagan on September 3 1982Summary of provisions EditThe Act included certain provisions related to the US health care system Established the prospective payment system for inpatient hospital care using the diagnosis related group DRG coding system citation needed Established authority for certain payments for hospice care 2 Recognized Medicare as the secondary payer for health services to individuals covered by another private health insurance plan citation needed Established the provisions for utilization review as reviews of the pattern of quality of care in an area of medical practice where actual performance is measured against objective criteria which define acceptable and adequate practice citation needed Allowed for the contracting of health maintenance organizations to provide services to Medicare recipients Part C of Medicare citation needed Established the Katie Beckett waiver also called the TEFRA waiver a Medicaid waiver concerning the income eligibility for home based Medicaid services for children under the age of nineteen It is also called a TEFRA waiver because it was passed as a provision of the Tax Equity and Fiscal Responsibility Act of 1982 The Office of Tax Analysis of the United States Department of the Treasury summarized the tax changes as follows 3 repealed scheduled increases in accelerated depreciation deductions tightened safe harbor leasing rules required taxpayers to reduce basis by 50 of investment tax credit instituted 10 withholding on dividends and interest paid to individuals tightened completed contract accounting rules increased FUTA wage base and tax rateEffects and controversies EditThe 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 4 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 5 Some conservatives led by then Congressman Jack Kemp claim that the promised spending reductions never occurred 6 One week after TEFRA was signed H R 6863 the Supplemental Appropriations Act of 1982 which Ronald Reagan claimed would bust the budget 7 was passed by both houses of Congress over his veto 8 Four years later then budget director David Stockman 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 6 The original TEFRA bill as passed by the House would have lowered taxes 9 The Republican controlled Senate replaced the text of the original House bill with a number of tax increases and the bill became law after President Ronald Reagan signed it A lawsuit was filed by an individual named Garrison R Armstrong claiming that TEFRA violated the Origination Clause in Article One of the United States Constitution which requires all revenue bills to originate in the House The United States Court of Appeals for the Ninth Circuit ruled against Armstrong saying We therefore conclude that the Senate did not exceed its authority under the origination clause when it proposed the extensive amendments that ultimately became TEFRA 10 In 1988 libertarian political writer Sheldon Richman described TEFRA as the largest tax increase in American history In 2003 former Reagan adviser Bruce Bartlett wrote in National Review that TEFRA raised taxes by 37 5 billion per year elaborating according to a recent Treasury Department study TEFRA alone raised taxes by almost 1 percent of the gross domestic product making it the largest peacetime tax increase in American history 11 However this increase was achieved primarily through the cancellation of future tax cuts scheduled by ERTA the year before that had yet to take effect at the time of TEFRA s passage 12 Taxpayers still receive 375 billion in tax cuts in the 3 years following TEFRA 12 A chart from the United States Department of the Treasury study 3 showing the bill s effect on government revenues is reproduced below As it shows the TEFRA increased tax revenues by almost 1 0 98 of GDP in marked contrast to the 1981 tax cuts and the milder effects of the other Reagan era tax bills The study makes note that these government revenue estimates do not take into account the effect of the bills on GDP and therefore are not inclusive of resulting increases in revenue that could occur from an increase in GDP 3 The bill also created a hospice benefit to the Medicare program for the terminally ill with a 1986 sunset provision It allowed States to add a hospice benefit to the Medicaid program Revenue effects of major tax bills enacted under Reagan as percentage of GDP 3 Number of years after enactmentTax bill 1 2 3 4 First 2 yr avg 4 yr avgEconomic Recovery Tax Act of 1981 1 21 2 60 3 58 4 15 1 91 2 89Tax Equity and Fiscal Responsibility Act of 1982 0 53 1 07 1 08 1 23 0 80 0 98Highway Revenue Act of 1982 0 05 0 11 0 10 0 09 0 08 0 09Social Security Amendments of 1983 0 17 0 22 0 22 0 24 0 20 0 21Interest and Dividend Tax Compliance Act of 1983 0 07 0 06 0 05 0 04 0 07 0 05Deficit Reduction Act of 1984 0 24 0 37 0 47 0 49 0 30 0 39Omnibus Budget Reconciliation Act of 1985 0 02 0 06 0 06 0 06 0 04 0 05Tax Reform Act of 1986 0 41 0 02 0 23 0 16 0 22 0 01Omnibus Budget Reconciliation Act of 1987 0 19 0 28 0 30 0 27 0 24 0 26Total 0 33 0 53 1 63 1 97 0 10 0 95References Edit Pub L Tooltip Public Law United States 97 248 96 Stat 324 enacted September 3 1982 Medicare Benefit Policy Manual Chapter 9 Coverage of Hospice Services Under Hospital Insurance on cms gov a b c d Office of Tax Analysis September 2006 2003 Revenue Effects of Major Tax Bills PDF United States Department of the Treasury Working Paper 81 page 12 Retrieved 2009 07 18 Congressional Budget Office The Economic and Budget Outlook Fiscal Years 1984 1988 February 1983 Policy Archive A Digital Archive of Public Policy Research PDF a b Stockman David A The Triumph of Politics Why the Reagan Revolution Failed Harper and Row 1986 pp 368 369 1 DEFICIT POLITICS AND DEMOCRATIC UNITY THE SAGA OF TIP O NEILL JIM WRIGHT AND The Conservative Democrats in the House of Representatives During the Reagan Era 2 Archived 2015 10 15 at the Wayback Machine thomas loc gov Appeals United States Court of Circuit Ninth 1969 12 31 759 F2d 1378 Armstrong v United States OpenJurist F2d 759 1378 Armstrong v United States 759 F 2d 1378 Bruce Bartlett 2003 10 29 A Taxing Experience National Review a b Jodie T Allen 16 August 1996 The Biggest Tax Increase in History Slate Retrieved from https en wikipedia org w index php title Tax Equity and Fiscal Responsibility Act of 1982 amp oldid 1169607469, wikipedia, wiki, book, books, library,
