Assuming that a taxpayer is entitled to no deduction or exemption other than a specific exemption of $4,000, the following table indicates the amount of Income Tax imposed by the revised Law upon the annual net income of an individual ranging from $4,000 to $2,000,000. As a matter of general interest there has also been included in this table the total tax levied under the previous Statute on the corresponding amounts of income: Analysis and Comment The Sixteenth Amendment to the Federal Constitution became effective in February, 1913, and gave to Congress the power "to levy and collect taxes on incomes from whatever source derived," etc. In October, 1913, the former Income Tax Law became effective, and in January, 1916, the Supreme Court of the United States upheld its constitutionality in the case of Brushaber vs. Union Pacific Railroad. The revised Income Tax Law, repealing the 1913 Statute, was enacted as part of a general revenue measure under date of September 8, 1916. Individual Income Tax Individuals are taxed and the provisions hereunder are applied accordingly as such individuals come within either of the two named classes: (a) Citizens of the United States wherever re- (b) Non-resident aliens as to the United States. The taxable income of citizens or residents of the United States includes that which arises from every source within or without the United Taxable Rates of Normal Tax States; taxable income of non-resident aliens includes only that which arises within the United States. The Nineteen Thirteen Statute levied a basic or normal tax of one per cent. and a surtax or so-called additional tax ranging from one to six per cent. The present Law increases the normal tax to two per cent. and makes effective additional rates of from one to thirteen per cent., i.e., a total tax beginning at two and increasing to a maximum of fifteen per cent. The additional tax, aside from the normal tax of two per cent., is graduated and levied as follows: Deduction at the Source The principle of deduction at the source is retained in the new Law and in the case of individuals relates only to the normal tax. The new Statute with the revised rates applies to taxable income of the present calendar year 1916, but until January 1, 1917, there will be deducted at the source only the one per cent. normal tax provided by the previous Law. It should be made entirely clear that the revised Statute levies a two per cent. normal tax on income for the year 1916, but during this year only one per cent. is subject to deduction at the source, and provision for the payment of the remaining one per cent. of this year's normal tax will be arranged in all probability by the Treasury Department revising the blank for the individiual return of income for the year 1916. The revised Statute continues to allow a specific or personal exemption of $3,000 to each unmarried person, and $4,000 to a married person living with husband or wife; not more than a total of $4,000 may be claimed by a husband and wife living together. As the present Statute does not change the former one in this respect, it may be noted that in the view of the Treasury Department, $3,000 each or a total of $6,000 may be claimed by husband and wife when they are separated and living permanently apart. In respect to the computation of the additional tax the Treasury Department has ruled that the separate income of husband and wife should be taxed separately and not as one income; for example, the normal tax only would be imposed upon a husband's net income of $19,000 and his wife's net income of $10,000. Specific or Personal Exemption Husband and Wife Non-Resident Aliens Head of Estates and Applies to Tax Only In the view of the Treasury Department the old Law did not extend the specific exemption to non-resident aliens, but the revised Statute permits this allowance to all classes of taxable individuals. It is stated that a non-resident alien shall not be allowed this exemption unless he file a return including his total income derived within the United States. There seems to be no practical point, however, in this stipulation as the Statute requires his return regardless of the allowance of the $3,000 or $4,000 specific exemption. The former Law is also changed in that the head of a family is given a $4,000 exemption, and estates during the period of administration or settlement, as well as trusts or other estates from which the income is not distributed annually or regularly, are allowed a specific exemption of $3,000. This $3,000, however, shall include the ordinary deductions allowed by the Statute such as taxes, interest paid, losses, etc. In this connection obviously it is not the intention of the Statute to limit such estates and trusts to total deductions of $3,000. Guardians or trustees are permitted to take advantage of the personal exemption on behalf of each ward or cestui que trust to the amount of $3,000 or $4,000 as the case may be. The present Statute allows the specific exemption of $3,000 or $4,000 only in the computation of the normal tax. The Treasury De |