Stimulating the Economy in 1924 – One Cent at a Time

Treasury Secretary Andrew Mellon on a 3-cent postage stamp.

In 1921, President Warren G. Harding appointed financier Andrew Mellon to the post of Secretary of the Treasury. One of Mellon’s most immediate goals was to reduce the large national debt that was incurred during World War I. His plan was to reduce tax rates to stimulate spending and to encourage tax payments.

When the federal income tax was created in 1913, the top rate was 7%. By the time World War I was over in 1918, the top rate was 77%. Under Mellon’s plan, the marginal rates were reduced throughout the 1920s so that by 1929 the top rate was 24%.

Secretary Mellon’s signature as it appears on US currency

The Revenue Act of 1924 lowered the top marginal rate to 40%, included a 25% earned income credit and retroactively gave a 25% rebate of income taxes paid in 1924 for income earned in 1923. The lowest bracket – for income less than $4,000.00 – was reduced from 4% to 2%.

In 1923, Mildred A. Demling of Buffalo was 18 years old and worked for the NY Telephone Company. She apparently had taxable income in 1923 of $1.00 and paid $.04 in income taxes. As a result of the Revenue Act of 1924, she received the 25% rebate on her 1923 taxes in the form of the check that appears above for $.01.

For reasons known only to her, she failed to cash the check and so it remains as a numismatic relic from an earlier time.

2 thoughts on “Stimulating the Economy in 1924 – One Cent at a Time

  1. That 1¢ check certainly cost the Treasury more to issue and mail than its value. That it would tax $1 in income is rather astounding. I wonder at what point the IRS decided to just round down or up these fractional amounts.


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