No essential were made in the system of internal taxes till when the Tariff Act of August 2Sth sought to compensate tor the pros pcetive falling off in customs duties by raising the tax on distilled spirits from 90 cents per gallon to $1.10 per gallon, and by imposing a tax upon incomes. The Supreme Court of the United States decided the income tax established by the law to be unconstitutional (see 1Ncomt: TAx), while the increased rate on spirits (lid not pievent a diminution of revenue from that source.
When, in 1898, was declared against Spain, internal taxation was chiefly relied upon to meet the increased expenditures. In framing the War Revenue Act of 1898 there was ample experience to draw upon, and that measure shows a judi cious use of the taxing power. The act, which went into effect on July 1, 1898, provided an in ciease of rates upon some articles and reiistab lishcd sonic of the taxes which the experience of 1862 and 1870 had demonstrated to be most pro ductive. It imposed a special tax on bankers, brokers, proprietors of theatres, circuses, and other entertainment enterprises, tobacco dealers and manufacturers. It left untouched the rates on distilled spirits. On fermented liquors and also on tobacco and snuff the rates were doubled, while on cigars and cigarettes. previously heavily taxed, they were slightly increased. An impor tant feature of the law was the imposition of stamp taxes upon mercantile papers of all kinds and upon proprietary articles (patent medicines) and wines. The revenue receipts under the law
as amended are shown in the following table, which gives for comparison the years 1897 and Fiscal year Internal revenue ending receipts June 30, 1997 9146,619.593.47 June 30, 1898 170.866,619.36 June 30. 1R99 273,484,573.44 June 30, 1900 295,216,107.57 June 30, 1901 306,871,669.42 A comparison of receipts in 1897 and 1899 will show the effect of the new law, and will also rdiect the increasing prosperity of the country, as shown in the larger returns of 1898 in the fore gcing table, without change of rates: With the return of peace the demand for a reduction of revenue beeal110 general. By a law of March 2, 1901, taking ('fleet July 1. 1901, con siderable reductions were made, the tax on fer mented liquors being reduced from $2 per barrel to $1.60, the maximum cigar tax going back to what it was before the war; while all stamp taxes on proprietary articles and the most troublesome taxes on business papers, such as hills of lading, express receipts, certificates of various kinds, insurance contracts, mortgages, hank checks. and telegrams, were repealed. A further act of March 2. 1902, which went into effeet July I, 1902, re moved the last vestiges of the war taxes, old rates tieing restored and the remaining new taxes being abolished. Consult ITOVVe. Taxation in the United States Fader tile internal Revenue System 1791 189.7 (New York. 1896). See N A NC E ; TAX