The immense cost of U.S. participation in World War I had necessitated a wide variety of new taxes and increases in existing ones. When the conflict ended, the nation faced two choices: (1) Retain the high taxes and pay down the large debt accumulated during the war, or (2) provide relief to taxpayers by reducing or eliminating taxes.
Hardings secretary of the treasury, Andrew Mellon, supported the latter path and pressed Congress to enact new tax legislation. The resulting Revenue Act, which only partially pleased the secretary, provided for the following:
The Revenue Act of 1921 highlighted an enduring problem attempting to balance the responsible position of discharging the nations obligations with the ever-popular demand for lowering taxes.
The wartime tax on excess profits was repealed
the minimum surtax (a tax that increases an already existing tax) rate was reduced from 65 to 50 percent, but Mellon had urged a much deeper cut
- the corporate tax was actually increased from 10 to 12.5 percent.
See other aspects of Harding's domestic policy.