 Main Idea: The consequence of tax reform was to make the individual tax code more complex than ever.

 Key Terms: Accelerated depreciation Investment tax credit Surcharge Alternative minimum tax Capital gains Value-added tax Flat tax

 Tax Reform 1981: President Reagan believed high taxes slowed the economy  Reduced taxes for individuals and businesses  Reforms favored the wealthy and the businesses  Federal budget had less money coming in, debt rose

 Tax Reform 1986: New laws made it harder for the rich to avoid taxes  Taxes got higher for the poor, too 1993: National debt had tripled since 1980  Tax reform was needed to balance the budget  Used the Omnibus Budget Reconciliation Act

 Tax Reform 1997: Taxpayer Relief Act  High tax revenues led to a break for most Americans  Capital gains tax was reduced as well 2001: Revenues were growing, Americans got a tax cut

 Value Added Tax Add a tax to an item at each stage of production Advantages:  Hard to avoid the tax  Hard to shift the burden of the tax  Easy to collect  People might save more money instead of spending it

 Value Added Tax Disadvantages  Invisible to consumers  Would compete with sales taxes

 The Flat Tax Advantages  Simple  Closes or minimizes most loopholes  Reduces the need for people in tax preparation

 The Flat Tax Disadvantages  Removes many behavior incentives  Benefits the rich at the expense of the poor  We have seen growth with our current tax system

 Chapter 9 Quiz in 10 minutes  With a partner, complete “Reviewing the Facts” 1-4, 6, and 9