From a Class Tax to A Mass Tax: The Revenue Act of 1942
World War II transformed the nation’s tax system. Although planning for a war tax began as early as 1939, pressure for new revenue increased dramatically after Pearl Harbor. Instead of excess profits or a new general sales tax, Congress and the administration agreed to keep the personal income tax at the center of wartime finance. The Revenue Act of 1942, the cornerstone of the modern income tax, created a personal income tax that was both progressive and broad based.
The new law lowered the personal exemption level. This change transformed the income tax from a “class tax” – paid only by the wealthy few – to a “mass tax” that affected nearly 60 percent of American families. Between 1939 and 1945, the number of individual taxpayers grew from 3.9 million to 42.6 million. Over the same period, income tax collections grew from only $2.2 billion to $35.1 billion. (Brownlee 2003, 115)