what is the tax equity and fiscal responsibility act of 1982 tefra 
the tax equity and fiscal responsibility act of 1982 tefra is a law passed in 1982 that was designed to reduce the federal budget deficit through a combination of tax increases spending cuts and tax reform measures the legislation reversed some elements of the economic recovery tax act of 1981 erta also known as the kemp roth act both pieces of legislation were passed early in the presidency of ronald reagan understanding the tax equity and fiscal responsibility act of 1982 tefra shaped by republican senator robert dole then chair of the senate finance committee tefra was meant to raise more revenue by closing loopholes in the tax system introducing stricter compliance and tax collection measures increasing excise taxes on cigarettes and telephone services and increasing corporate taxes adjusted for inflation tefra remains the biggest tax increase in u s history it was largely a repudiation of the erta which had passed a year earlier and remains the largest tax cut in u s history at the time tefra was being debated in congress the u s economy was in the middle of a recession some called it a double dip recession because the economy fell to recessionary levels recovered and then fell again into recession all in the single 12 month period between the summer of 1981 and the summer of 1982 government revenues fell by about 6 due to a combination of erta tax cuts and normal recessionary effects 1the result was a budget deficit that grew to a then record 110 7 billion in 1982 in 2021 the federal budget deficit was 2 8 trillion 23tefra also rescinded some erta reductions in personal income tax rates that had not yet gone into effect an obscure provision of tefra came back to haunt the legal marijuana industry decades later the provision probably inserted as a political throwaway line forbids those trafficking in controlled substances from using most business tax deductions 4other elements of tefratefra ultimately touched a vast number of americans in its efforts to reduce federal spending and increase government revenues for example many of the reimbursement rules for the medicare and medicaid programs were revised to rein in their costs procedures for payments of social security and unemployment compensation were altered 5the bill temporarily doubled the federal cigarette tax and tripled the telephone service tax it also had an impact on businesses and investors tefra abolished some of the tax breaks businesses received under erta such as accelerated depreciation it also instituted a 10 withholding tax on dividends and interest paid to individuals who did not have certified tax identification numbers 5historic tax increase under tefrapresident ronald reagan had campaigned on tax cuts and limited government early in his first term he had won a then substantial 28 3 billion in tax cuts for business through the passage of erta 6many were puzzled that he would agree to undo some of the tax breaks created in erta which had been a significant legislative achievement but he could not ignore the growing deficit 7in fact reagan resisted any tax increases for a time but eventually relented in exchange for a pledge for even bigger spending cuts as part of the deal 