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considered that the bonds were a safe

investment, the interest return offered was

comparatively low and a very large number of the subscriptions were made with the

primary object of helping to win the war

rather than to obtain a financial return.

In fact, the bonds soon fell below par,

those of the second loan falling as low

at times as 92 or 93. Those of the first

loan, although for a lower rate of interest,

held their own better than any of the

other issues owing to their special income

tax exemption features. The decline in

the bonds was in large measure due to

the fact that great numbers of people

bought bonds and then found that they

wished to dispose of them, sometimes

from necessity. This resulted in throwing

bonds upon the market In vast sums with

consequent fall in prices. It was greatly

to the credit of the American people

that even when bonds of old issues were

much below par they were willing to

purchase new bonds in enormous sums.

At the time the Victory Loan was

floated, Secretary of the Treasury Carter

Glass, who had recently succeeded McAdoo,

estimated that when all the war bills were

paid the total national debt would be

approximately $30,000,000,000. However,

the United States had advanced some

$10,000,000,000 to foreign countries. Subtracting this sum from the total debt

would leave a net national indebtedness

of about $20,000,000,000. This meant

an average per capita indebtedness of

about $200 for every man, woman, and

child in the country. It was very questionable, however, whether some of the

nations to whom money had been advanced would ever be able to meet the

obligations, so that the total net indebtedness would probably be greater than

$20,000,000,000. This is a vast sum,

yet it represents perhaps only ten per cent

of the total wealth of the country and

should not prove an impossible load for

the nation. The war had, in fact, proved

to be expensive beyond precedent. By

April, 1919, the Government had in two

years expended about $4,000,000,000 more

than the National Government had spent

from 1776 down to 1917, including all

civil expenses and the cost of all our

other wars. In fact, after the armistice

was signed, the Government expended

more than double what it spent in putting

down the Great Rebellion of 1861-65.

It was felt, however, that posterity

should not be made to bear the entire

financial burden of the conflict, so an

elaborate system of war taxation was

enacted. The first measure of this sort

was the so-called War Revenue Act,

which was approved by the President on

October 3, 1917. An increased income

tax, increased internal revenue duties,

new excise taxes, a heavy war excess profits tax running from 20 to 60 per cent,

formed the chief bases of the new act.

The individual income tax, which had

been increased in September, 1916, was

amended. All single persons with a net

income of over $1,000 must pay two

per cent on all beyond that sum, while all

married persons having net incomes of

$2,000 must pay on the excess beyond

that sum, provided, however, that an

exemption was allowed for each dependent

child under 18 and for other dependents

physically or mentally defective. A graduated surtax rising from one to 50 per cent

on large incomes was added to the existing

income rates. It was estimated that

the act would produce $2,534,870,000 for

the fiscal year 1918.

The expenses of the war mounted so

rapidly that, in his report of May, 1918,

Secretary of the Treasury McAdoo urged

that a new measure providing for a revenue

of six billion dollars should be passed

before the adjournment of Congress. A

bill designed to raise $8,000,000,000 or

one-third the estimated expenditures for

the coming year, passed the House in

September, but the Senate procrastinated

in its consideration of the measure. The

collapse of the Central Powers led to a

change of plans, and the measure finally

enacted, in March, 1919, was designed

to raise only about six billions, with a

reduction to four billions the second year.

The measure increased income and other

old taxes, and levied many new taxes.