Revenue Act of 1918

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The Revenue Act of 1918, 40 Stat. 1057, raised income tax rates over those established the previous year. The bottom tax bracket was expanded but raised from 2% to 6%.

The act simplified the tax structure created by the 1917 act. Instead of applying a "like normal tax" and a "like additional tax" to the 1916 act normal tax and additional tax it created a single tax structure with a Normal Tax and a Surtax.

The top rate was increased to 77%, and applied to income above $1,000,000. The top rate of the War Revenue Act of 1917 had taxed all income above $2,000,000 at a 67% rate.

The act was applicable to incomes for 1918. For 1919 and 1920 the top normal tax rate was reduced from 12 percent to 8%. This reduced the top marginal tax rate that combined normal tax and surtax from 77% to 73%.

Even in 1918, only 5% of the population paid federal income taxes (up from 1% in 1913), and yet the income tax funded one-third of the cost of World War I.

Income Tax for Individuals[edit]

A Normal Tax and a Surtax were levied against the net income of individuals as shown in the following table.

Revenue Act of 1918
Income Tax on Individuals

40 Stat. 1062 [1]

Net Income
(dollars)
Normal Rate
for 1918
(percent)
Normal Rate
for 1919, 1920
(percent)
Surtax Rate
(percent)
Combined Rate
for 1918
(percent)
Combined Rate
for 1919, 1920
(percent)
0 6 4 0 6 4
4,000 12 8 0 12 8
5,000 12 8 1 13 9
6,000 12 8 2 14 10
8,000 12 8 3 15 11
10,000 12 8 4 16 12
12,000 12 8 5 17 13
14,000 12 8 6 18 14
16,000 12 8 7 19 15
18,000 12 8 8 20 16
20,000 12 8 9 21 17
22,000 12 8 10 22 18
24,000 12 8 11 23 19
26,000 12 8 12 24 20
28,000 12 8 13 25 21
30,000 12 8 14 26 22
32,000 12 8 15 27 23
34,000 12 8 16 28 24
36,000 12 8 17 29 25
38,000 12 8 18 30 26
40,000 12 8 19 31 27
42,000 12 8 20 32 28
44,000 12 8 21 33 29
46,000 12 8 22 34 30
48,000 12 8 23 35 31
50,000 12 8 24 36 32
52,000 12 8 25 37 33
54,000 12 8 26 38 34
56,000 12 8 27 39 35
58,000 12 8 28 40 36
60,000 12 8 29 41 37
62,000 12 8 30 42 38
64,000 12 8 31 43 39
66,000 12 8 32 44 40
68,000 12 8 33 45 41
70,000 12 8 34 46 42
72,000 12 8 35 47 43
74,000 12 8 36 48 44
76,000 12 8 37 49 45
78,000 12 8 38 50 46
80,000 12 8 39 51 47
82,000 12 8 40 52 48
84,000 12 8 41 53 49
86,000 12 8 42 54 50
88,000 12 8 43 55 51
90,000 12 8 44 56 52
92,000 12 8 45 57 53
94,000 12 8 46 58 54
96,000 12 8 47 59 55
98,000 12 8 48 60 56
100,000 12 8 52 64 60
150,000 12 8 56 68 64
200,000 12 8 60 72 68
300,000 12 8 63 75 71
500,000 12 8 64 76 72
1,000,000 12 8 65 77 73
  • Exemption of $1,000 for single filers and $2,000 for married couples and head of family; $200 exemption for each dependent under 18.

Inflation-adjusted numbers[edit]

Corrected for inflation by CPI:

1918 dollars 2005 dollars
$1,000,000 $12,933,775
$2,000,000 $25,867,550

Notes[edit]