War Revenue Act passed in U.S. - HISTORY
Year
1917

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.

ALSO ON THIS DAY

UAW walks out on Ford

On this day in 1961, the United Auto Workers (UAW) union goes on strike at Ford plants across the country to win higher wages and better benefits for its members. It was the first company-wide strike since Ford had agreed to a collective-bargaining deal in 1941. Ford had been the ...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 by ...read more

Britain successfully tests A-bomb

Britain successfully tests its first atomic bomb at the Monte Bello Islands, off the northwest coast of Australia.During World War II, 50 British scientists and engineers worked on the successful U.S. atomic bomb program at Los Alamos, New Mexico. After the war, many of these ...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

Operation Wallowa commences

Elements of the 1st Cavalry Division launch Operation Wallowa in South Vietnam’s northernmost provinces.A task force was sent in to relieve pressure on the U.S. Marines, who were fighting a heavy series of engagements along the Demilitarized Zone (DMZ). As these operations ...read more

The shot heard round the world

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

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 this day, 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 published ...read more

Clive Owen born

On this day in 1963, the ruggedly handsome actor Clive Owen, who will become known for his work in such movies as Closer and Sin City, is born in Coventry, England.After graduating from London’s Royal Academy of Dramatic Art, Owen performed with the Young Vic Theater Company and ...read more

Hurricane Stan bears down on Mexico

On this day in 2005, Hurricane Stan bears down on the Mexican coastline after passing over the Yucatan Peninsula. The storm brought torrential rains to Central America and caused a series of landslides over the next several days that buried several towns and killed more than ...read more

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

Battle of Corinth

On this day in 1862, Confederates under General Earl Van Dorn attemptto recapture Corinth, a vital rail center in Mississippi. However, the following day, the Second Battle of Cornith ended in defeat for the Rebels.Northern Mississippi was the scene of much maneuvering during the ...read more