Year
1917
Month Day
October 03

War Revenue Act passed in U.S.

On October 3, 1917, six months after the United States declared war on Germany and began its participation in the First World War, the U.S. Congress passes the War Revenue Act, increasing income taxes to unprecedented levels in order to raise more money for the war effort.

The 16th Amendment, which gave Congress the power to levy an income tax, became part of the Constitution in 1913; in October of that year, a new income tax law introduced a graduated tax system, with rates starting at 1 percent and rising to 7 percent for taxpayers with income above $500,000. Though less than 1 percent of the population paid income tax at the time, the amendment marked an important shift, as before most citizens had carried on their economic affairs without government knowledge. In an attempt to assuage fears of excessive government intervention into private financial affairs, Congress added a clause in 1916 requiring that all information from tax returns be kept confidential.

By then, however, preparation for and entry into World War I had greatly increased the government’s need for revenue. Congress responded to this need by passing an initial Revenue Act in 1916, raising the lowest tax rate from 1 percent to 2 percent; those with incomes above $1.5 million were taxed at 15 percent. The act also imposed new taxes on estates and excess business profits.

By 1917, largely due to the new income tax rate, the annual federal budget was almost equal to the total budget for all the years between 1791 and 1916. Still more was required, however, and in October 1917 Congress passed the War Revenue Act, lowering the number of exemptions and greatly increasing tax rates. Under the 1917 act, a taxpayer with an income of only $40,000 was subject to a 16 percent tax rate, while one who earned $1.5 million faced a rate of 67 percent. While only five percent of the U.S. population was required to pay taxes, U.S. tax revenue increased from $809 million in 1917 to a whopping $3.6 billion the following year. By the time World War I ended in 1918, income tax revenue had funded a full one-third of the cost of the war effort.

READ MORE: Can US Presidents Start Wars?

FACT CHECK: We strive for accuracy and fairness. But if you see something that doesn't look right, click here to contact us! HISTORY reviews and updates its content regularly to ensure it is complete and accurate.

ALSO ON THIS DAY

Sinéad O’Connor tears up a photo of Pope John Paul II on "Saturday Night Live"

On October 3, 1992, Irish musician Sinéad O’Connor stuns the audience at 30 Rockefeller Plaza and viewers across the United States when she tears up a photo of Pope John Paul II during a performance on Saturday Night Live. O’Connor surprised the SNL staff when she opted to sing ...read more

Amanda Knox murder conviction overturned in Italy

On October 3, 2011, in a decision that makes international headlines, an Italian appeals court overturns the murder conviction of Amanda Knox, an American exchange student who two years earlier was found guilty in the 2007 murder of her British roommate, Meredith Kercher, in ...read more

Maze hunger strike called off

A hunger strike by Irish nationalists at the Maze Prison in Belfast in Northern Ireland is called off after seven months and 10 deaths. The first to die was Bobby Sands, the imprisoned Irish Republican Army (IRA) leader who initiated the protest on March 1, 1981–the fifth ...read more

Iraq wins independence

With the admission of Iraq into the League of Nations, Britain terminates its mandate over the Arab nation, making Iraq independent after 17 years of British rule and centuries of Ottoman rule. Britain seized Iraq from Ottoman Turkey during World War I and was granted a mandate ...read more

O.J. Simpson acquitted

At the end of a sensational trial, former football star O.J. Simpson is acquitted of the brutal 1994 double murder of his estranged wife, Nicole Brown Simpson, and her friend, Ronald Goldman. In the epic 252-day trial, Simpson’s “dream team” of lawyers employed creative and ...read more

A miraculous home run wins the pennant for NY Giants

On October 3, 1951, third baseman Bobby Thomson hits a one-out, three-run home run in the bottom of the ninth inning to win the National League pennant for the New York Giants. Thomson’s homer wrapped up an amazing come-from-behind run for the Giants and knocked the Brooklyn ...read more

President Lincoln proclaims official Thanksgiving holiday

On October 3, 1863, expressing gratitude for a pivotal Union Army victory at Gettysburg, President Abraham Lincoln announces that the nation will celebrate an official Thanksgiving holiday on November 26, 1863. The speech, which was actually written by Secretary of State William ...read more

U.S. Army hangs four Modoc leaders for the murder of a Civil War general

On October 3, 1873, the United States military hangs four Native Americans found guilty of murdering the Civil War general Edward Canby during the Modoc War in Oregon. Canby was the highest ranking military official–and the only general–ever killed by Native Americans. As with ...read more

Writer, singer and folk icon Woody Guthrie dies

On October 3, 1967, Woody Guthrie, godfather of the 1950s folk revival movement, dies. In 1963, Bob Dylan was asked by the authors of a forthcoming book on Woody Guthrie to contribute a 25-word comment summarizing his thoughts on the man who had probably been his greatest ...read more

“The Red Badge of Courage” is published

On October 3, 1895, The Red Badge of Courage, by Stephen Crane, is published in book form. The story of a young man’s experience of battle was the first American novel to portray the Civil War from the ordinary soldier’s point of view. The tale originally appeared as a serial ...read more

This Day In History: East and West Germany reunite after 45 years

East and West Germany reunite after 45 years

Less than one year after the destruction of the Berlin Wall, East and West Germany come together on what is known as “Unity Day.”  Since 1945, when Soviet forces occupied eastern Germany, and the United States and other Allied forces occupied the western half of the nation at the ...read more

Germany conducts first successful V-2 rocket test

On October 3, 1942, German rocket scientist Wernher von Braun’s brainchild, the V-2 missile, is fired successfully from Peenemunde, as island off Germany’s Baltic coast. It traveled 118 miles. It proved extraordinarily deadly in the war and was the precursor to the ...read more