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TERFA

The Tax Equity and Fiscal Responsibility Act rescinded some of the effects of the Economic Recovery Tax Act (ERTA) passed the year before. The scheduled increases in accelerated depreciation deductions were repealed, a 10 percent withholding on dividends and interest paid to individuals was instituted, and the Federal Unemployment Tax Act wage base and tax rate were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.

TRA

The Tax Reform Act is Reagan-era measure that lowered the top tax rate from 50% to 28%, placed significant limitations on tax shelter deductions, and changed 401(k) plans. It also eliminated deductions for interest on consumer loans such as credit card debt. Income averaging, which reduced taxes for those only recently making a much higher salary than before, was eliminated. The act, however, increased the personal exemption and standard deduction. The act also increased incentives favoring investment in owner-occupied housing relative to rental housing by increasing the home mortgage interest deduction.
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