The Tax Reform Act of 1986 (TRA) was passed by the 99th United States Congress and signed into law by President Ronald Reagan on October 22, 1986.
After his victory in the 1984 presidential election, President Ronald Reagan made simplification of the tax code the central focus of his second term domestic agenda.
[8] This was jettisoned in the Omnibus Budget Reconciliation Act of 1990, otherwise known as the "Bush tax increase", which violated his Taxpayer Protection Pledge.
[11] The Economic Recovery Tax Act of 1981 (ERTA) removed the pension plan clause and raised the contribution limit to the lesser of $2000 or 100% of earned income.
The 1986 Tax Reform Act retained the $2000 contribution limit, but restricted the deductibility for households that have pension plan coverage and have moderate to high incomes.
Since the profit sharing percentage must be uniform for all employees, this had the intended result of making more equitable contributions to 401(k)'s and other types of DC pension plans.
Before this act, parents claiming tax deductions were on the honor system not to lie about the number of children they supported.
However, the Tax Reform Act of 1986 greatly expanded the AMT to aim at a different set of deductions that most Americans receive.
Things like the personal exemption, state and local taxes, the standard deduction, private activity bond interest, certain expenses like union dues and even some medical costs for the seriously ill could now trigger the AMT.
In 2007, the New York Times reported, "A law for untaxed rich investors was refocused on families who own their homes in high tax states.
This contributed to the end of the real estate boom of the early-to-mid 1980s, which in turn was the primary cause of the U.S. savings and loan crisis.
When losses from these deals were no longer able to be deducted, many investors sold their assets, which contributed to sinking real estate prices.
The Internal Revenue Code does not contain any definition or rules dealing with the issue of when a worker should be characterized for tax purposes as an employee, rather than as an independent contractor.
Introduced by Senator Daniel Patrick Moynihan, Section 1706 added a subsection (d) to Section 530 of the Revenue Act of 1978, which removed "safe harbor" exception for independent contractor classification (which at the time avoided payroll taxes) for workers such as engineers, designers, drafters, computer professionals, and "similarly skilled" workers.
"[19] A suicide note by software professional Joseph Stack, who flew his airplane into a building housing IRS offices in February 2010, blamed his problems on many factors, including the Section 1706 change in the tax law while even mentioning Senator Moynihan by name, though no intermediary firm is mentioned, and failure to file a return was admitted.