This Day In Market History: The Tax Reform Act Of 1986

Each day, Benzinga will take a look back at a notable market-related moment that happened on this date.

What Happened?

On this day 32 years ago, the House of Representatives approved the Tax Reform Act of 1986.

Where Was The Market?

The S&P 500 closed the day at 209.81 and the Dow Jones Industrial Average finished the day at 1,542.43.

What Else Was Going On In The World?

In 1985, Hulk Hogan and Mr. T defeated Paul Orndorff and Rowdy Roddy Piper in the main event of the first-ever WrestleMania. A U.S. postage stamp cost 22 cents.

The Second Reagan Tax Cut

The Tax Reform Act of 1986 was the second round of tax cuts during President Ronald Reagan's administration. The act was designed to be tax revenue-neutral and offset lower tax rates by eliminating $60 billion in annual loopholes. The act lowered the top income tax rate on individuals from 50 percent to 38.5 percent and raised the upper limit of the bottom bracket for married couples filing jointly from $5,720 to $29,750. It also reduced the total number of tax brackets from 15 to just four and increased the standard deduction, personal exemption and earned income credit.

Investors were a bit skeptical of the Tax Reform Act of 1986 because, unlike the current Republican tax cut bill, the 1986 tax cuts increased taxes on corporations by shifting $24 billion of the nation’s tax burden to the corporate world. The day the act made it past the House vote, the S&P 500 dropped 0.4 percent. 

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