The law provides that incomes shall be subject to a tax of one per cent. on the amount by which they exceed the prescribed minimum limit of exemption.  This is designated as the “normal income tax.”  There is, then, an “additional tax” of one per cent, on the amount by which any income exceeds $20,000.  The rate is increased to two per cent. on the amount above $50,000, to three per cent. above $75,000, to four per cent. above $100,000, to five per cent. above $250,000, and to six per cent. above $500,000.  Therefore, under the normal and additional tax combined, the first $20,000 of income, exclusive of the minimum exemption, will be taxed one per cent.; the next $30,000, two per cent.; the next $25,000, three per cent.; the next $25,000, four per cent.; the next $150,000, five per cent.; the next $250,000, six per cent.; and all income above that point seven per cent.  This is a rigorous application of the progressive principle.

The minimum exemption, at the same time, is comparatively high,—­$4,000 for a married person and $3,000 for everybody else.  The higher exemption in case of the married is conditional upon husband and wife living together, and applies only to their aggregate income; that is to say, it can not be deducted from the income of each.  It may be noted, in this connection, that in England the exemption allowed under the income tax is L160 or $800; in Prussia it is 900 marks, or $225; and in the State of Wisconsin it is $800 for individuals and $1,200 for a husband and wife, with a further allowance for children or dependent members of the family.

The sharply progressive rates and the comparatively high exemption have given rise to the criticism that this is a rich man’s income tax and disregards the principle that all persons should contribute to the expenses of the government in proportion to their several abilities.  It is often said that an income tax ought to reach all incomes with the exception of those which are close to or below the minimum necessary for subsistence, and that if people generally were called upon to contribute directly to the government they would take greater interest in public affairs and show more concern over any wasteful or unwise expenditure of public money.  In reply it is contended that the limitation of the tax to the wealthy or well-to-do classes is justified because these classes do not pay their fair share of the indirect national taxes, or of local property taxes.  These debatable questions lie outside the scope of the present article.  It is evident, however, that the income tax should not be criticized as if it were a single tax or formed the only source of revenue for the Federal government.  From the fiscal standpoint it occupies a subordinate position in the national finances, being expected to yield about $125,000,000 annually out of a total estimated tax revenue of $680,000,000.