Synopsis of

The War Tax Law

Approved October 3, 1917

NORMAL TAX

War Income Tax

INDIVIDUALS

In addition to the present rate of normal tax of 2%, the law provides for a further normal tax of 2% on incomes of residents or citizens of the United States in excess of $2,000 for married persons or heads of families, or in excess of $1,000 for single persons. By the assessment of this additional tax of 2%, incomes in excess of $4,000 for married persons or heads of families, or $3,000 for single persons, will be subject to a normal tax of 4%. (Sec. 1.)

It will be noted that the additional normal tax does not apply to non-resident alien individuals.

SURTAX

In addition to the surtax imposed by the act of September 8, 1916, a further surtax on incomes of citizens and residents of the United States and non-resident aliens, is imposed as shown in the chart on the following page: (Sec. 2.)

(The chart includes the rates of the existing tax, the war tax and total tax.)

INCOME TAX CHART

Based on the War Income Tax Law and the Income Tax Law, as amended October 3, 1917

(Chart shows the tax payable by a married person, but does not take cognizance of the $200 exemption for each dependent child)

1,480 1% 7% 8%

20,000 320 360

40,000 720 760
60,000 1,120 1,160|
80,000 1,520 1,560|
100,000 1,920 1,960
150,000 2,920 2,960
200,000 3,920 3,960|
250,000 4,920 4,960|
300,000 5,920 5,960
500,000 9,920 9,960
750,000 14,920 14,960
1,000,000 19,920 19,960
1,500,000 29,920 29,960
2,000,000 39,920 39,960
3,000,000 59,920' 59,960'
† Single persons, $3,000.

2,280 2% 10% 12%
3,080 3% 14% 17%
3,880 4% 18% 22%
5,880 5% 22% 27%
7,880 6% 25% 31%
9,880 7% 30% 37%
11,880 8% 34% 42%
19,880 9% 37% 46%
29,880 10% 40% 50%
39,880 10% 45% 55%
59,880 11% 50% 61% 1,000,000
800,180
79,880 12% 50% 62% 1,500,000 2,000,000 310,000 1,050,300 1,130,180
119,880 13% 50% 63% On excess of 2,000,000' 630,000' 1,680,300 1,800,180
Single persons $1,000. **Total Surtax is the total of the Installments for the Income considered.

740,300

15,000 "

20,000

250

500

1,180

20,000 "

40,000

1,600

2,100

3,580

40,000 "

60,000

2,400

4,500

6,780

60,000 "

80,000

3,400

7,900

10,980

80,000

"

100,000

4,400

12,300

16,180

100,000 "

150,000 13,500

25,800

31,680

150,000 "

200,000 15,500

41,300

49,180

200,000 "

250,000 18,500

59,800

69,680

250,000 "

300,000 21,000

80,800

92,680

300,000 "

500,000 92,000

172,800

192,680

500,000 "

750,000 125,000

297,800

327,680

750,000 "

1,000,000 137,500|

435,300 475,180

66

1,500,000 305,000|

66

COLLECTION OF TAX

Additional taxes under the War Tax Law shall be levied, assessed, collected and paid in the same manner as similar taxes imposed by the Income Tax Law of September 8, 1916. (Sec. 3.)

EXEMPTIONS

For the purpose of the assessment of the additional war tax, the specific exemption allowed to married persons or heads of families shall be $2,000, and for single persons, $1,000.

(Sec. 3.)

By the amendment to Section 7, Act of September 8, 1916, it is provided that the head of a family shall be entitled to an additional exemption of $200 for each child dependent upon him or her, if under eighteen years of age, or if incapable of self-support because mentally or physically defective. (Page 12.)

RETURNS

Annual returns for taxes are required for net incomes of $1,000 or over, in the case of single persons, and $2,000 or over, in the case of married persons or heads of families. (Sec. 3.)

DEDUCTION AT SOURCE

Deduction of tax at the source on interest derived from tax free bonds shall not apply to the additional normal tax of two per centum until after January 1, 1918, and thereafter only one two per centum normal tax shall be deducted. Any further normal tax, for which the recipient of such income is liable, shall be paid by the recipient. (Sec. 3.)

ADDITIONAL TAX

CORPORATIONS

In addition to the tax of 2% now assessed on net earnings of corporations, under the act of September 8, 1916, the War Tax Law provides for a further tax of 4%, making the total income tax on net earnings now 6%. (Sec. 4.)

COLLECTION OF TAX

The additional tax shall be levied, assessed, collected and paid in the same manner as the tax imposed by the Act of September 8, 1916, as amended. (Sec. 4.)

DIVIDENDS

For the purpose of the assessment of the additional tax, the income of a corporation shall be credited with the amount received as dividends upon the stock or from the net earnings of any other corporation, which is taxable upon its net income for the additional tax. (Sec. 4.)

EFFECTIVE DATE OF LAW

The additional taxes provided for shall be assessed for the calendar year 1917 and each year thereafter.

If a corporation has fixed its own fiscal year, the additional tax imposed for the fiscal year ending during the calendar year 1917 shall be assessed, collected and paid only on that proportion of its income for such fiscal year which the period between January 1, 1917, and the end of such fiscal year bears to the whole fiscal year. (Sec. 4.)

PORTO RICO AND THE PHILIPPINE ISLANDS

The provisions of this title do not extend to Porto Rico or the Philippine Islands, and the legislatures of Porto Rico and the Philippine Islands are given power to amend, alter, modify or repeal the income tax laws enforced in Porto Rico or the Philippine Islands. (Sec. 5.)