The Revenue Act of 1918, 40 Stat. 1057, raised income tax rates over those established the previous year. The bottom tax bracket was expanded but raised from 2% to 6%. The act simplified the tax structure created by the 1917 act. Instead of applying a "like normal tax" and a "like additional tax" to the 1916 act normal tax and additional tax it created a single tax structure with a Normal Tax and a Surtax. The top rate was increased to 77%, and applied to income above $1,000,000. The top rate of the War Revenue Act of 1917 had taxed all income above $2,000,000 at a 67% rate. The act was applicable to incomes for 1918. For 1919 and 1920 the top normal tax rate was reduced from 12 percent to 8%. This reduced the top marginal tax rate that combined normal tax and surtax from 77% to 73%. Even in 1918, only 5% of the population paid federal income taxes (up from 1% in 1913), and yet the income tax funded one-third of the cost of World War I.

Income Tax for Individuals

A Normal Tax and a Surtax were levied against the net income of individuals as shown in the following table.

Inflation-adjusted numbers

Corrected for inflation by CPI: