The fiscal systems of no two countries were exactly alike, yet no purpose would be served in outlining that used in any except the more important belligerents. The interest in these countries attaches to the amount of revenue raised, the methods used in raising it, and the general effect on the citizenship. Interest attaches also to the method of publicity for securing loan subscribers, and to what extent loans were used in proportion to taxes.1

The United States and Great Britain stand out preeminently as the two countries that placed most reliance upon taxes. Reasons for this in the United States might be that she had more time to prepare before entering the conflict. Many so-called authorities advocated a pay-as-you-go policy, which no doubt had an influence. The net result, however, was that loans greatly exceeded the amount secured from taxes. As a whole, probably a little less than one third of the revenue was raised from taxes.

England's precedent in using so large a proportion of taxes to finance a previous war gave her an ideal toward which to work, and this no doubt had much to do with the expansion of her tax system. The unexpected demand, of course, could only be met by credit until the tax system could be put into operation. This was done quite effectively, however, and about the same proportion of the entire fund was raised from this source as in the United States. In both countries the results of inflation from the issue of more bank notes, and the many securities, was quickly reflected in the rapidly rising prices. France did not use taxes early in the conflict, but strongly favored borrowing, and this formed the source of the bulk of the revenue until the breaking credit system needed to be braced. The proportion of the entire expense which was met from taxes was less than that of England or of the United States.

1 For an interesting comparison of the sources of revenue of the important countries, see table on p. 497.

Germany and Austria-Hungary form the best example of recent emergency financiering, in which borrowing and bank credits were relied upon almost exclusively. The proof that it does not work successfully over a period of years, with an excessive demand for funds, is clearly demonstrated by the events in these countries. Depreciation of the currency, a failure of the credit machinery, followed by a resort to taxes as a method of alleviation, was simply a repetition of the story which has been written each time that a nation has tried to use borrowing to excess.

Additional Reading

Laughlin, Credit of the Nations. Bogart, Direct and Indirect Costs of the War. Bogart, War Costs and Their Financing. Annals of the American Academy of Political and Social Science, vol. lxxv, vol. xcv, pp. 193-220.


The Revenue Act of 1921, signed by President Harding on November 23, 1921, has made many important changes. Some of the more important are: Every individual with a gross income of $5,000 or more must file a return, whatever his net income may be. The normal rates of 8 per cent on net incomes of more than $4,000, and of 4 per cent on smaller incomes, were not changed. The surtax rates were changed to range from 1 per cent to 50 per cent on net incomes in excess of $5,000. The 50-per-cent rate applies to all net incomes in excess of $200,000. The exemption allowed to a head of a family is $2,500 if his net income is not in excess of $5,000, otherwise it is $2,000. A deduction of $400 is allowed for each dependent. The 1921 law repeals the tax on excess profits and fixes the tax on the net income of corporations at 121/2 per cent,