Revenue Act of 1916

Overview

The Revenue Act of 1916 was a United States federal law, signed on September 8, 1916, that raised income and estate tax rates to fund military preparedness ahead of US entry into the First World War. It raised the bottom income-tax rate from 1% to 2% and the top marginal rate to 15% on incomes above $2 million (up from a 7% top rate under the 1913 act), and it created the first federal estate tax, with a $50,000 exemption and rates from 1% to 10%.[1] According to Gaffney and Harrison's The Corruption of Economics, the 1916 act — and the broader early federal income-tax push of that decade — had a drafting hand from Warren Worth Bailey, a single-tax Congressman from Pennsylvania, who saw a progressive income tax as a way to shift federal revenue away from wage income and toward unearned income; the corpus's summary of the book describes it as "the first Federal income tax, drafted by Georgist Congressman Bailey," which exempted most wage income.[2]

Bailey's own single-tax sympathies were not the mainstream motivation for the act, which was primarily a wartime revenue and defense-preparedness measure supported by the Wilson administration; independent tax-history sources make no mention of Bailey in connection with the 1916 act specifically, crediting him instead with an earlier flanking maneuver in the 1913 tariff-and-income-tax fight.[1][3] The episode nonetheless illustrates a broader point in the Georgist historiography: that the graduated federal income tax, rather than a tax on land rent, became the vehicle through which "unearned income" language entered American fiscal policy — a substitution Gaffney and Harrison treat as part of the single-tax movement's absorption into, and dilution by, the broader progressive income-tax cause. It should be read with an explicit caveat: the wiki has not located a primary or independent scholarly source directly tying Bailey to the drafting of the 1916 Act specifically (as opposed to his documented role in the 1913 Revenue Act / tariff fight), so the Gaffney–Harrison attribution of the "first Federal income tax" to Bailey is reported here as their claim, not as an independently confirmed fact.

See Also

• The Corruption of Economics — the narrative this episode is drawn from
• Gaffney & Harrison, The Corruption of Economics (book) — the discovery source
• Single Tax — the movement Bailey belonged to
• Unearned Increment — the concept the income tax was, in Georgist eyes, an imperfect substitute for taxing

Sources

1. Revenue Act of 1916 (Act of September 8, 1916, ch. 463), 39 Stat. 756 — the primary law text (Statutes at Large, 64th Congress, Sess. I). The income-tax schedule (Title I) confirms the graduated "additional tax" rising to "thirteen per centum … upon the amount by which such total net income exceeds $2,000,000," which combined with the 2% normal tax yields the 15% top marginal rate (39 Stat. 756–757). The estate tax (Title I-A, Sec. 201, 39 Stat. 777) is "imposed upon the transfer of the net estate of every decedent dying after the passage of this Act," at "One per centum of the amount of such net estate not in excess of $50,000" graduating to "Ten per centum of the amount by which such net estate exceeds $5,000,000" — confirming the 1%–10% estate-tax schedule and the $50,000 first bracket. PDF (govinfo, STATUTE-39) · archived Cross-reference: "Revenue Act of 1916," Wikipedia — en.wikipedia.org/wiki/Revenue_Act_of_1916 — used for the September 8, 1916 signing date and the 1%→2% and 7%→15% framing; neither source mentions Bailey.
2. Mason Gaffney, Fred Harrison and Kris Feder, The Corruption of Economics (Shepheard-Walwyn / Centre for Incentive Taxation, 1994), Stratagem essay Ch. 1 — cited in the wiki's book summary discovery notes for the claim that Bailey, a single-tax Congressman, drafted the first federal income tax law with the goal of falling on unearned rather than wage income.
3. The Coolidge Review, "How a Tariff Fight Created the Federal Income Tax" — coolidgereview.com — used for independent corroboration of Warren Worth Bailey's role in the 1913 income-tax/tariff fight and his later disavowal of the income tax by 1920; this source does not connect him to the 1916 Act specifically, which is why that link is flagged as citation-needed above.