Bill Gradison - 1980s Tax Act Legislation - The Economic Recovery Tax Act of 1981

The Economic Recovery Tax Act of 1981

In Congress, "Bill" was a member of the U.S. House Ways and Means Committee, during the 95th through the 101st U.S. Congress, and was closely involved in many successful legislative efforts. One effort was the original sponsorship of the bill providing the income tax indexing clause that was later inserted into President Reagan's famous tax reduction bill of 1981, called The Economic Recovery Tax Act of 1981. This indexing made it so that income tax brackets would automatically be moved up as the inflation rate rose, so that "bracket creep" would be avoided, whereby income tax rates rise only because of inflation, not because of a rise in deflated income levels. This addition to the 1981 tax bill was very popular, as indicated by its co-sponsorship by a majority of members of the U.S. House of Representatives (sponsorship by a majority of members indicates the bill would be passed if put up for a vote on the House floor).

Indexing of taxes became a part of a substitute tax bill, backed by President Reagan in a July 27, 1981 evening address to the nation, and known as the Conable-Hance Substitute Tax Bill, H.R. 4260. Instead of the one year tax cut bill sponsored by Ways and Means Chairman Dan Rostenkowski, or the two-year tax cut bill sponsored by the Senate Finance Committee Chair Bob Dole, the substitute bill was a three-year 25 percent tax cut, with federal estate tax relief and the indexing of tax rates to prevent bracket creep beginning in 1985. And this substitute bill became The Economic Recovery Tax Act of 1981.