INCOME TAX

—The imposition of a tax levy on incomes is an old device for obtaining government revenue. It appeared in the Middle Ages, in Italy, and later In France. England raised money NU on taxing incomes centuries before she inaugurated the modern method by establishing an income tax as a fiscal expedient in 1799 to meet the huge outlays caused by the Napoleonic wars, an impost that lasted till hostilities ceased. In 1842 she revived the tax, and it has since been in operation, an integral part of the country’s fiscal system, despite Gladstone’s attempt to repeal it in 1874. It has been as low as a few pennies to the pound sterling. During and after the World War it rose to a levy that expropriated one-third of annual incomes heyond $750. By the time the United States adopted, 1913, the income tax as a stable source of revenue, the system had long been firmly established in almost every other country of importance. Not that it was wholly new to Americans. The colonies drew revenue from incomes, and quite a number of the States resorted to the same method of filling their treasuries long before the national government did. State taxation of incomes, as pursued early in the XIX. cent., was a failure. When the Civil War came only 6 States, Ma achusetts, South Carolina, Penn sylvan is, Virginia, North Carolina, and Alabama, were making such a levy. In a number of other states the tax had been abandoned. During that war a number of Southern States adopted the tax in addition to those named. The Federal Government also levied an impost on incomes to meet war emergencies, the tax lasting from 1861 to 1872. In 1894 an attempt to revive the Federal Income Tax failed through the unconstitutionality of the proposed measure. State income tax meantime languished, the only levies in force by the close of the XIX. cent. being those of Ma achusetts, Virginia, North Carolina, and Louisiana. The tax of the last named siate soon after disappeared. With almost no exceptions, the state administration of the income tax laws was poor, the yield small, and the taxes generally unpopular. | In the XX. cent.; the need of revenue compelled a number of the States to pay more and more attention to the income tax. Wisconsin led the way, in 1911, by devising a new tax system for personal and corporation incomes, and by the close of 1920 there were ten other states, Mi ouri, Delaware, Virginia, New York, North Dakota, and New Mexico, making similar levies by improved. methods. Connecticut, Montana, and West Virginia tax the net incomes of corporations, without corresponding taxation on incomes of individuals. South Carolina stood out, in 1919, by abolishing the State income tax altogether. Ohio tried EU to establish an income tax in that year, but the measure was repudiated by the Legislature. The Federal Income Tax of 1913, imposed a graduated tax of one per cent on incomes from $3,000 upward, with an additional tax of one per cent. on incomes of $20,000 upward. In 1916 (tho middle of the World War period), the normal rate was doubled from one to two per cent, and the additional rate increased by scale, so that the extra tax fell heavy on very large incomes. In 1917, American entry into the war produced the War Revenue Act, which increased the income tax a e ments by making the extra levy apply to all incomes above $5,000, instead of $20,000, and reduced the amounts that could be exempted. In 1919, the taxable incomes were widened to include those exceeding $1,000, the normal rate was raised to four per cent, which became eight per cent on incomes exceeding $8,000, while the surtax was applied to incomes above $8,000, beginning at one per cent, and graduating upward to 65 per cent on incomes of $1,000,000. The enormous expansion of revenue from the income tax since the United States adopted it may be judged by the yield of 1913-1914, based on the 1913 tax, which was $28,- 253,534, and the amount collected in 1922 (income and profits taxes), which was $2,068,916,465.