Economic Recovery Tax Act Law and Legal Definition

Economic Recovery Tax Act is unofficially called the Kemp-Roth, this was a cornerstone of economic policy under President Reagan passed in 1981. The three components of this act are: (1) a decrease in individual income taxes, phased in over three years, (2) a decrease in business taxes, primarily through changes in capital depreciation, and (3) the indexing of taxes to inflation, which was implemented in 1985. This act was intended to address the stagflation problems of high unemployment and high inflation that existed during that 1970s and to provide greater incentives for investment.