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.
{| class="wikitable" style="text-align: center;"
|-
|colspan="6"| Revenue Act of 1918<br />Income Tax on Individuals<br />
|-
| Net Income<br />(dollars)
| Normal Rate<br>for 1918<br />(percent)
| Normal Rate<br>for 1919, 1920<br />(percent)
| Surtax Rate<br />(percent)
| Combined Rate<br>for 1918<br />(percent)
| Combined Rate<br>for 1919, 1920<br />(percent)
|-
| 0 || 6 || 4 || 0 || 6 || 4
|-
| 4,000 || 12 || 8 || 0 || 12 || 8
|-
| 5,000 || 12 || 8 || 1 || 13 || 9
|-
| 6,000 || 12 || 8 || 2 || 14 || 10
|-
| 8,000 || 12 || 8 || 3 || 15 || 11
|-
| 10,000 || 12 || 8 || 4 || 16 || 12
|-
| 12,000 || 12 || 8 || 5 || 17 || 13
|-
| 14,000 || 12 || 8 || 6 || 18 || 14
|-
| 16,000 || 12 || 8 || 7 || 19 || 15
|-
| 18,000 || 12 || 8 || 8 || 20 || 16
|-
| 20,000 || 12 || 8 || 9 || 21 || 17
|-
| 22,000 || 12 || 8 || 10 || 22 || 18
|-
| 24,000 || 12 || 8 || 11 || 23 || 19
|-
| 26,000 || 12 || 8 || 12 || 24 || 20
|-
| 28,000 || 12 || 8 || 13 || 25 || 21
|-
| 30,000 || 12 || 8 || 14 || 26 || 22
|-
| 32,000 || 12 || 8 || 15 || 27 || 23
|-
| 34,000 || 12 || 8 || 16 || 28 || 24
|-
| 36,000 || 12 || 8 || 17 || 29 || 25
|-
| 38,000 || 12 || 8 || 18 || 30 || 26
|-
| 40,000 || 12 || 8 || 19 || 31 || 27
|-
| 42,000 || 12 || 8 || 20 || 32 || 28
|-
| 44,000 || 12 || 8 || 21 || 33 || 29
|-
| 46,000 || 12 || 8 || 22 || 34 || 30
|-
| 48,000 || 12 || 8 || 23 || 35 || 31
|-
| 50,000 || 12 || 8 || 24 || 36 || 32
|-
| 52,000 || 12 || 8 || 25 || 37 || 33
|-
| 54,000 || 12 || 8 || 26 || 38 || 34
|-
| 56,000 || 12 || 8 || 27 || 39 || 35
|-
| 58,000 || 12 || 8 || 28 || 40 || 36
|-
| 60,000 || 12 || 8 || 29 || 41 || 37
|-
| 62,000 || 12 || 8 || 30 || 42 || 38
|-
| 64,000 || 12 || 8 || 31 || 43 || 39
|-
| 66,000 || 12 || 8 || 32 || 44 || 40
|-
| 68,000 || 12 || 8 || 33 || 45 || 41
|-
| 70,000 || 12 || 8 || 34 || 46 || 42
|-
| 72,000 || 12 || 8 || 35 || 47 || 43
|-
| 74,000 || 12 || 8 || 36 || 48 || 44
|-
| 76,000 || 12 || 8 || 37 || 49 || 45
|-
| 78,000 || 12 || 8 || 38 || 50 || 46
|-
| 80,000 || 12 || 8 || 39 || 51 || 47
|-
| 82,000 || 12 || 8 || 40 || 52 || 48
|-
| 84,000 || 12 || 8 || 41 || 53 || 49
|-
| 86,000 || 12 || 8 || 42 || 54 || 50
|-
| 88,000 || 12 || 8 || 43 || 55 || 51
|-
| 90,000 || 12 || 8 || 44 || 56 || 52
|-
| 92,000 || 12 || 8 || 45 || 57 || 53
|-
| 94,000 || 12 || 8 || 46 || 58 || 54
|-
| 96,000 || 12 || 8 || 47 || 59 || 55
|-
| 98,000 || 12 || 8 || 48 || 60 || 56
|-
| 100,000 || 12 || 8 || 52 || 64 || 60
|-
| 150,000 || 12 || 8 || 56 || 68 || 64
|-
| 200,000 || 12 || 8 || 60 || 72 || 68
|-
| 300,000 || 12 || 8 || 63 || 75 || 71
|-
| 500,000 || 12 || 8 || 64 || 76 || 72
|-
| 1,000,000 || 12 || 8 || 65 || 77 || 73
|}
- Exemption of $1,000 for single filers and $2,000 for married couples and head of family; $200 exemption for each dependent under 18.
Inflation-adjusted numbers
Corrected for inflation by CPI:
{| border="1" cellpadding="2" cellspacing="0" width="300"
|- bgcolor=lightgrey
! | 1918 dollars
! | 2005 dollars
|-
| align="center" | $1,000,000
| align="center" | $12,933,775
|-
| align="center" | $2,000,000
| align="center" | $25,867,550
|}