This Day In Market History: Revenue Act Of 1916

Each day, Benzinga takes a look back at a notable market-related moment that occurred on this date.

What Happened? On this day in 1916, Congress passed the Revenue Act of 1916.

Where The Market Was: The Dow Jones Industrial Average traded at 2,551, and the S&P 500 would have traded at around 9.4.

What Else Was Going On In The World? In 1916, the first Piggly Wiggly U.S. supermarket was opened in Memphis, TN. German World War I flying ace The Red Baron wins his first aerial combat near Cambrai, France. A new Ford Motor Company F Model T cost $360.

WWI Tax Hikes: World War I brought about a steep drop in international trade, forcing the U.S. government to look to taxes to generate much-needed revenue.

Just three years after the 16th Amendment implemented a federal income tax in 1913, the Revenue Act of 1916 raised the “normal” federal income tax rate from 1% to 2% for Americans earning at least $3,000 annually or joint filers earning at least $4,000 annually. The legislation also raised the surtax rate from a maximum of 6% on incomes over $500,000 to a maximum 13% on incomes over $2 million.

The Revenue Act of 1916 also raised corporate income tax rates from 1% to 2% and implemented a new federal estate tax. The estate tax applied a 1% to 10% tax rate on properties valued at over $50,000.

The goal of the Revenue Act of 1916 was to raise $205 million in new tax revenue, more than half of which would come from income taxes.