War Revenue Act of 1898 facts for kids

Quick facts for kids War Revenue Act of 1898
55th United States Congress
Citation	30 Stat. 448
Enacted by	Congress
Date enacted	June 10, 1898
Date signed	June 13, 1898
Legislative history
Bill	H.R. 10100
Bill published on	April 25, 1898
Introduced by	Nelson Dingley, Jr.
Summary
Enacted numerous taxes and authorized Treasury bond sales to fund the Spanish–American War

The War Revenue Act of 1898 was a law signed in the United States on June 13, 1898. This law created many new taxes. These taxes helped pay for the Spanish–American War. The law also set up an early version of today's estate tax. The Supreme Court of the United States even made two important decisions about this law.

Why the War Revenue Act Was Needed

The War Revenue Act of 1898 was created to help pay for the Spanish–American War. For many years, the people of Cuba wanted to be free from Spain. Things got much worse after the USS Maine (ACR-1) ship was destroyed. This happened in Havana harbor on February 15, 1898.

President McKinley asked Congress to declare war on April 11. Congress then passed a special statement on April 19. This statement demanded that Cuba become independent. It also allowed President McKinley to declare war if Spain did not agree. McKinley signed this statement into law on April 20. The U.S. then announced a naval blockade of Cuba. On April 25, the U.S. declared that a state of war had existed since April 21.

How the Bill Started

Congress knew right away that they would need more money for the war. On April 25, 1898, Representative Nelson Dingley, Jr. introduced a bill. This bill, called H.R. 10100, was meant to create new taxes.

Dingley's bill suggested selling $500 million in bonds. Bonds are like loans to the government. It also proposed raising $100 million from taxes. These taxes would be on many different items. They included chewing gum, beer, circuses, and insurance. They also taxed pawnbrokers, theaters, and wine. Some members of the Democratic Party thought these taxes would hurt poor people too much. They tried to change the law.

The Bill's Journey Through Congress

Nelson Dingley, Jr. was in charge of the powerful United States House Committee on Ways and Means. His committee started working on the bill the day after it was introduced. They discussed the bill on April 26 and 27. Then, they sent it to the full House for a vote. The House debated and passed the bill on April 27.

Next, the bill went to the United States Senate. There, it was sent to the United States Senate Committee on Finance. This committee made some changes to the bill. They sent the changed bill to the Senate floor on May 12. Democrats and some Republicans worked together. These Republicans were called "Silver Republicans". They wanted to use silver instead of gold for money. This group added new taxes on businesses. They also added taxes on bond deals.

The Senate Finance Committee's bill faced some challenges. The House bill aimed to raise $150 million in taxes. It also planned to borrow another $150 million if needed. But the Finance Committee's bill wanted to raise $200 million in taxes. It also wanted to get $100 million by issuing United States Notes and silver certificates. Another change was to tax all companies at the same rate. This meant small companies would not get a tax break.

The Senate removed the plan to issue Notes from the bill. But the plan to issue certificates stayed. There was an attempt to free small businesses from the company tax, but it failed. Many other changes were suggested in the Senate. These included an antitrust law and an income tax. All these suggestions failed. However, the Senate did limit how much silver coin the Treasury could issue. They also lowered the estate tax to 0.75 percent. An extra tax on imported tea was also added. The Senate started debating the changed bill on May 16. They approved it on June 4.

Final Approval

Both the House and Senate set up special groups called conference committees. These groups worked out the differences between the two versions of the bill. The House voted on the final report on June 9. They approved it with 154 votes for and 107 against. The Senate approved the report on June 10. They voted 43 for and 22 against.

President McKinley officially signed the War Revenue Act into law on June 13.

What the Law Included

The War Revenue Act of 1898 allowed taxes on many different things. These included fun activities, liquor, tea, and tobacco. It also required special tax stamps for some business deals. Examples are shipping documents and marine insurance. The law also created a one-cent per call "telephone tax." This tax lasted for three years.

There was also a tax on the total money earned by companies. This tax applied to earnings over $200,000. But it only affected sugar and oil refining companies. The Supreme Court had previously said a similar tax was not allowed. This was because it was a direct tax. The Constitution says direct taxes must be divided fairly among states. People against the tax also pointed out that it did not tax partnerships. So, Congress made the tax only for sugar and oil companies.

The act also let the U.S. Treasury sell $200 million in war bonds. These bonds paid 3 percent interest. But no more than $100 million in bonds could be active at one time. The government could also sell up to $100 million in bonds that would be paid back in less than a year. This was a big step for the government. It helped them create flexible ways to manage money. This was important for keeping the United States' credit strong.

Some people worried that not enough buyers would want these bonds. This was because the interest rate was low. But over 230,000 people bought bonds for less than $500. Another 88,000 people bought larger amounts. These bond sales and new taxes led to the government having extra money. This continued until 1917.

The government kept making silver coins until the Gold Standard Act was passed on March 14, 1900.

The Estate Tax Explained

The War Revenue Act included an estate tax. This was not the very first estate tax in U.S. history. But it was important because it was a graduated tax. This means the tax rate changed based on the amount of money. It was a first step towards the modern federal estate tax.

Many people did not like the estate tax. But it stayed in the War Revenue Act. The 1898 tax was placed on the total value of the estate itself. It was not on the people who received the money. The tax rate was between 0.75 percent and 15 percent. It depended on how big the estate was. It also depended on the relationship between the person who died and the person receiving the money. Only personal property was taxed. The first $10,000 of the estate was not taxed. Also, property given from a husband to his surviving wife was not taxed.

Supreme Court Decisions

The U.S. Supreme Court made two important decisions about the War Revenue Act.

In a case called Nicol v. Ames (1899), the Supreme Court decided something important. They said the tax on stocks, bonds, and other agreements was not a property tax. Instead, it was a tax on the right to trade these items. So, it was more like a sales tax. The court also said the law could apply to livestock sales.

In the second case, the court looked at whether the estate tax was allowed by the Constitution. The Supreme Court upheld the tax in Knowlton v. Moore (1900).