Revenue Act of 1918

TheRevenue Act of 1918,40 Stat. 1057, raisedincome taxratesover those established the previous year.The bottomtax bracketwas expanded but raised from 2% to 6%.

The act simplified the tax structure created by the1917 act.Instead of applying a "like normal tax" and a "like additional tax" to the1916 actnormal 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 theWar Revenue Act of 1917had 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 federalincome 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

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 40Stat.1062
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$1,000for single filers and$2,000for married couples and head of family;$200exemption for each dependent under 18.

Inflation-adjusted numbers

Corrected for inflationby CPI:

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