the demobilization of the army. This prohibition measure reduced the estimated yield from the tax on beverages by 500 million dollars. The other event was the signing of the armistice, which brought with it a reduction in the estimated expenditures of the government from approximately 24 billion dollars to 18 billion dollars. As a result the bill as submitted to the Senate provided for raising 6 billion dollars. "Taxes which can be easily borne amid the feverish activity and patriotic fervor of war times are neither so welcome nor so easily sustained amid the uncertainties, the depreciating inventories and the falling markets which are apt to mark the approach of peace," said Mr. Simmons in his report upon presenting the bill to the Senate December 6. After the bill had been passed by the Senate and while it was in conference, the Department of State announced that the prohibition amendment to the Constitution had been ratified by the requisite number of states so that the estimated yield of the new measure was again reduced by over half a billion dollars. The chief objection to the bill on the part of the Senate minority when it was before that branch of Congress was to the provision which fixed the rates for 1920. They argued that it was advisable to wait until conditions for that year could be ascertained, while the majority held that the taxpayers were entitled to know in advance what they were to pay. Another consideration which the advocates of this provision might well have mentioned is the administrative advantage of being able to plan for the collection of the tax. Senator La Follette presented a report in which he made a plea for increasing the amount to be raised by taxation, and for eliminating the proposed taxes on occupations, amusements (especially the cheaper kind), freight and passenger rates, and consumption taxes generally, substituting therefor a heavy tax on luxuries and war excess profits. Senator Smoot presented some additional views in which he advocated raising practically the entire revenue from a 1 per cent sale tax on consumption goods. Senator Thomas described the excess profits feature as "arbitrary, unjust, and indefensible" and objected to the inheritance tax on the ground that it was an encroachment upon the taxing power of the states. The Senate finally passed the bill December 23. About six hundred changes had been made in the House bill, hence the Conferees had a difficult undertaking. The greatest difficulties were over the rates of the excess profits tax. The Conferees managed to reach an agreement on February 1 and the bill was signed by the President and became law February 24. The law as finally enacted provides for raising about 6 billion dollars, four fifths to be from income and war excess profits taxes and one fifth from taxes on luxuries and semi-luxuries. The sources of revenue are almost the same as those of the act of September 8, 1916, as amended by the act of October 3, 1917, but the income and war excess profits taxes are expected to raise a larger proportion of the total than in the previous laws. The accompanying table (Table 1) shows: (1) the actual yield of the act of 1917 for the fiscal year of 1918; (2) its estimated yield for the fiscal year of 1919 if not amended or superseded; (3) the estimated revenues provided for by the recent House bill; and (4) the amount expected to be raised by the act of 1918. The estimated yield of the bill as passed by the Senate is not included because there is little difference between it and the act which was finally passed. The most striking new features in the law are the tax on the employment of child labor and a tax on the sale of luxuries to be paid by the purchaser. The act is composed of fourteen sections or titles as follows: V-Tax on Transportation and Other Facilities and Insurance. VII-Tax on Cigars, Tobacco and Manufactures thereof. VIII-Tax on Admissions and Dues. IX-Excise Taxes. X-Special Taxes. XI-Stamp Taxes. XII-Tax on Employment of Child Labor. XIII-General Administrative Provisions. XIV-General Provisions. Title I-General Definitions. This title merely contains definitions of terms which apply to the whole bill; for example, definitions of such terms as "person," life insurance company," "domestic," "foreign," and "taxpayer." Title II-Income Tax. (a) Individuals. The law provides for a normal tax of 6 per cent upon the first $4,000 of one's income above the exemptions allowed, and 12 per cent on the remainder. On income received after the taxable year of 1918, the rates are 4 and 8 per cent respectively. One of the confusing things in the TABLE 1.-COMPARATIVE REVENUES. YIELD OF ACT OF 1917 AND ESTIMATED 1 Compiled from the reports of chairmen Kitchin and Simmons. 2 Original estimate $1,137,000,000. Reduction due to prohibition and food conservation features of food stimulation bill. 8 Includes $72,000,000 from the tax on use of automobiles and motorcycles omitted in the bill as finally passed. It should be noted that the Act of 1918 did not become effective until February 24, 1919. The estimated revenue receipts under the existing law and the Revenue act of 1918, for the fiscal year ending June 30, 1919, are $6,077,200,000; and under the Revenue act of 1918 for the fiscal year ending June 30, 1920, are $4,184,510,000. previous law was the fact that there were two rates (2 and 4 per cent), due to the fact that the act of October, 1917, did not repeal, but was superimposed upon, the act of September, 1916. A normal tax of 2 per cent was levied under each, though exemptions were $2,000 larger in the earlier law. From an administrative standpoint it is unfortunate that Congress kept a similar complication in the new law. The following table shows the normal tax rates imposed by all of the recent income tax laws. TABLE 2. RATES OF NORMAL TAX OF THE FOUR INCOME TAX LAWS (PER CENT). 1 As in effect 1917. The act of 1917 provided for a 2 per cent rate to be superimposed upon the rates of the 1916 law, though with different exemption allowances as indicated. 2 Applicable only to income of single persons or of married persons not living with wife or husband. 3 For heads of families and married persons the rate was only 2 per cent. In addition to the normal tax, a surtax is imposed on incomes of over $5,000. The surtax rates of last year increased by 1 per cent for every $2,500 over $5,000, up to $20,000; thence by steps of about 4 per cent until they reached a maximum of 63 per cent on amounts in excess of $2,000,000. Under the new law, the rates increase by 1 per cent for every $2,000 increase of income from $6,000 to $100,000; thence by smaller steps until a maximum of 65 per cent is reached on amounts in excess of $1,000,000. The changes made by the Senate decreased slightly the rates upon incomes of $200,000 and less, but increased somewhat the rates upon larger incomes. Table 3 shows the surtax rates as imposed by the various acts. The personal exemption is the same as in the act of 1917; that is, $1,000 for a single person or for a married person who is not living with wife or husband; and $2,000 for a married person living with wife or husband, or for a person who maintains a home for one or more dependents. Under the former law a person who' was married on December 31 was entitled to the whole exemption. According to the most reasonable interpretation of the new law, |