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NORMAL TAX.—

Law. Section 210. That, .... there shall be levied, collected, and paid for each taxable year upon the net income of every individual a normal tax at the following rates:

(a) For the calendar year 1918,....

(b) For each calendar year thereafter (viz., for 1919 and after], 8 per centum of the amount of the net income in excess of the credits provided in section 216: Provided, That in the case of a citizen or resident of the United States the rate upon the first $4,000 of such excess amount shall be 4 per centum.

SURTAX.—All individual net incomes in excess of $5,000 are subject to surtaxes. The personal exemptions and other credits such as dividends? do not operate to relieve the taxpayer of surtaxes.

LAW. Section 211. (a) That, . . ., in addition to the normal tax imposed by section 210 of this Act, there shall be levied, collected, and paid for each taxable year upon the net income of every individual, a surtax equal to the sum of the following:

I per centum of the amount by which the net income exceeds $5,000 and does not exceed $6,000;

2 per centum of the amount by which the net income exceeds $6,000 and does not exceed $8,000;

3 per centum of the amount by which the net income exceeds $8,000 and does not exceed $10,000 ; ....

The rates prescribed by the law continue to rise i per cent with each $2,000 of income until the rate of 48 per cent is applied to the increment lying between $98,000 and $100,000. Above that amount the rates increase irregularly until

[Former Procedure] The normal rate under the 1913 law was i per cent (section II, A, sub. I). This applied for the years 1913, 1914 and 1915. The 1916 law made the normal rate 2 per cent (section 1 (a)). This rate was in force for one year (1916) before it was supplemented by an additional normal tax of 2 per cent (1917 law, section 1). Consequently in 1917 the normal tax amounted to 4 per cent in all. The normal rate for the calendar year 1918 was 12 per cent upon net incomes exceeding $4,000 and 6 per cent on the first $4,000 or any part thereof. In the case of the individual's fiscal year, beginning in 1918, the rates of 1918 were applicable to a portion of the year's income. See page 150, and Income Tax Procedure, 1919, page 111.

See page 29, et seq.
* See page 27
See page 28.

they reach “65 per centum of the amount by which the net income exceeds $1,000,000."

The rates applying to each successive increment of income, the tax which results from the application of the rates to the increments, and the cumulation of these taxes are set forth in the following table:

[Former Procedure] Under the 1913 law (section II, A, sub. 2) the surtax rates on net income of individuals were as follows: Net income subject to tax

$ 20,000 to $ 50,000 1%

50,000" 75,000 75,000“ 100,000 100,000 “ 250,000

250,000 “ 500,000

.... 500,000 and over These rates were in force in 1913, 1914 and 1915.

In 1916 the surtax rates were changed to the scale shown in column A in the table given below (1916 law, section 1 (b)). These rates applied in 1916, and in 1917 the scale of rates shown in column B was added to the 1916 rates and the resulting combined rates shown in column C were imposed for that year.

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Net income subject to tax

1916 law (percent.

age)

1917 law Total surtax
(percent- applied in 1917

age) (percentage)

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5,000 to $ 7,500 10,000 12,500" 15,000 20,000 40,000 60,000 80,000 100,000 150,000 200,000 250,000 300,000 500,000 750,000 1,000,000 1,500,000On excess of

7,500....
10,000....
I 2,500.
15,000....
20,000. ...
40,000.
60,000.
80,000.
100,000.
150,000..
200,000, .
250,000..
300,000..
500,000...

750,000....
1,000,000..
1,500,000...
2,000,000....
2,000,000....

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In 1918 the surtax rates were the same as those given on page 141 for

SURTAX RATES AND AMOUNTS OF SURTAXES PAYABLE

IN 1919 UNDER 1918 LAW

Net income

Increments of income subject
to surtax at specified rates

Surtax rates applicable to

sp cified increments of income

Amount of sur

tax payable on | each increment

Total cumulative

surtax*

$

$10

50

100 120 140

5,000 6,000 8.000 10,000 12,000 14,000 16,000 18,000 20,000 22,000 24,000 26,000 28,000 30,000 32,000 34,000 36,000 38,000 40,000 42,000 44,000 46,000 48,000 50,000 52,000 54,000 56,000 58,000 60,000 62,000 64,000 66,000 68,000 70,000 72,000 74,000 76,000 78,000 80,000 82,000 84,000 86,000 88,000 90,000 92,000 94,000 96,000 98,000 100,000 150,000 200,000 300,000 500,000 1,000,000 Over 1,000,000

5,000 to 6,000 8,000 10,000 12,000 14,000 16,000 18,000 20,000 22,000 24,000 26.000 28,000 30,000 32,000 34,000 36,000 38,000 40.000 42,000 44,000 46,000 48,000 50,000 52,000 54,000 56,000 58,000 60,000 62,000 64,000 66,000 68,000 70,000 72,000 74,000 76,000 78,000 80,000 82,000 84,000 86.000 88,000 90,000 92.000 94,000 96,000 98.000 € 100,000 " 150.000 € 200,000 " 300,000 500.000 "

6,000 8,000 10,000 12,000 14,000 16,000 18,000 20,000 22,000 24,000 26,000 28,000 30,000 32,000 34,000 36,000 38,000 40,000 42,000 44,000 46,000 48,000 50,000 52,000 54.000 56,000 58,000 60.000 62,000 64,000

180 200 220 240 260 280 300 320 340 360 380 400 420 440 460 480 500 520 540 560 580 600 620 640 660 680 700 720

110 190 290 410 550 710 890 1.090 1,310 1,550 1,810 2,090 2,390 2,710 3,050 3,410 3,790 4,190 4,610 5,050 5,510 5,990 6,490 7,010 7,550 8,110 8,690 9,290 9,910 10,550 11,210 11,890 12,590 13,310 14,050 14,810 15,590 16,390 17,210 18,050 18,910 19,790 20,690 21,610 22,550 23,510 49,510 77,510 137,510 263,510 583,510

66,000

76,000 80,000

800

820 840

68,000 70,000 72,000 74,000 78,000 82,000 84,000 86,000 88,000 90,000 92,000 94,000 96,000 98,000 100,000 150,000 200,000 300,000 500,000 1.000.000

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*To ascertain the total tax payable, the normal tax of 8 per cent (reduced to 4 per cent on the first $4.000) must be applied to the total net income. minus the credits and the result added to the figures given in this table.

Official directions for interpreting the foregoing table:

REGULATION. .... The surtax for any amount of net income not shown in the above table is computed by adding to the total surtax for the largest amount shown which is less than the income the surtax upon the excess over that amount at the rate indicated in the table. For example, if the amount of net income is $63,128, the surtax is the sum of $8,690 (the surtax upon $62,000 as shown by the table) plus 30 per cent of $1,128, or $338.40, making a total surtax of $9,028.40. (Art. 12.)

Surtax on the sale of mineral deposits.

LAW. Section 211. .... (b) In the case of a bona fide sale of mines, oil or gas wells, or any interest therein, where the principal value of the property has been demonstrated by prospecting or exploration and discovery work done by the taxpayer, the portion of the tax imposed by this section attributable to such sale shall not exceed 20 per centum of the selling price of such property or interest.

REGULATION. Where the taxpayer by prospecting and locating claims, or by exploring and discovering undeveloped claims, has demonstrated the principal value of mines, oil or gas wells, which prior to his efforts had a merely nominal value, the portion of the surtax attributable to a sale of such property or of the taxpayer's interest therein shall not exceed 20 per cent of the selling price. Exploration work alone without discovery is not sufficient to bring a case within this provision. Shares of stock in a corporation owning mines, oil or gas wells do not constitute an interest in such property. To determine the application of this provision to a particular case, the taxpayer should first compute the surtax in the ordinary way upon his net income, including his net income from any such sale. The proportion of the surtax indicated by the ratio which the taxpayer's net income from the sale of the property, computed as prescribed in article 715," bears to his total net income is the portion of the surtax attributable to such sale, and if it exceeds 20 per cent of the selling price of the property such portion of the surtax shall be reduced to that amount." (Art. 13.)

Rates applicable to corporations.-Corporations are subject to a flat rate (no surtax) which applies to "net income" in excess of certain credits, fully discussed in the previous chapters. 12

19 See Excess Profits Tax Procedure. " For comments and illustration, see Excess Profits Tax Procedure. 12 See pages 36-39.

CORPORATIONS IN GENERAL.

Law. Section 230. (a) That, . . . . there shall be levied, collected, and paid for each taxable year upon the net income of every corporation a tax at the following rates:

(1) For the calendar year 1918 ...."

(2) For each calendar year thereafter, 10 per centum of such excess amount."

SPECIAL RATES ON TRANSPORTATION COMPANIES UNDER GOVERNMENT CONTROL.-

LAW. Section 230. .... (b) For the purposes of the Act approved March 21, 1918, entitled "An Act to provide for the operation of transportation systems while under Federal control, for the just compensation of their owners and for other purposes," [for the calendar year 1919] ..., four-fifths of the tax, imposed by paragraph (2) of subdivision (a) 15 shall be treated as levied by an Act in amendment of Title I of the Revenue Act of 1917.

REGULATION. The Act to provide for the operation of transportation systems while under federal control, for the just compensation of their owners, and for other purposes, of March 21, 1918, authorizes the President to agree with carriers for their just compensation and provides :

“Every such agreement shall provide that any Federal taxes under the Act of October third, nineteen hundred and seventeen, or Acts in addition thereto or in amendment thereof, commonly called war taxes, assessed for the period of Federal control beginning January first, nineteen hundred and eighteen, or any part of such period, shall be paid by the carrier out of its own funds, or shall be charged against or deducted from the just compensation; that other taxes assessed under Federal or any other governmental authority for the period of Federal control or any part thereof, either on the property

^ [Former Procedure] The 1913 rate on corporate incomes was identical with the normal rate on individual incomes, i per cent [section II, G (a)). Again in the 1916 law it was made the same, 2 per cent (section 10). In 1917, however, when an additional normal tax of 2 per cent was made to apply to individuals the additional corporation rate was made 4 per cent (section 4), the total rate applying to corporations in 1917 being 6 per cent as compared with a total normal tax of 4 per cent on individuals. Individuals were permitted to take credit, in the case of dividends received, for only 4 per cent in place of 6 per cent, the 2 per cent difference operating as a penalty upon the corporate form. The rate for 1918 was fixed at 12 per cent.

* See page 36.

1 (Former Procedure] The rate for 1918 was five-sixths of the tax imposed by paragraph (1) of subdivision (a). In the case of fiscal years beginning in 1918, the 1918 rate is applicable proportionately.

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