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Brief Explanation of the Victory Tax

See also: Victory Tax brocher, scans provided by Phyllis Merryman Cloyd

Prior to World War II, no one outside the government paid income tax; the people were, and understood themselves to be, immune from that tax. During WWII, Congress passed the Victory Tax (56 Stat. 884) to impose an income tax on every individual in The United States of America, something which had not been done by any previous income tax act.  Excepted from that tax were those already paying income taxes per I.R.C. 211(a) - nonresident alien individuals with no United States business or office but living in a "contiguous country" and having income from United States sources.

Because the Victory Tax, a wartime measure, was imposed on individuals in the states of the union (and not countries such as Canada or Mexico), those already taxed by section 211(a) had to be excepted from the Victory Tax or they would be taxed twice.  This suggests that the nonresident alien individuals living in "contiguous countries" were in fact living in states such as Virginia and Maryland - being outside the United States (District of Columbia).

The Victory Tax was repealed by section 6 of Income Tax Act of 1944, which in amending the I.R.C. includes the states of the union in the terms "certain foreign countries" (section 6 (b)(3)) and "foreign countries and possessions of the United States" (section 6 (b)(4)).  This restored the scope of income taxation to what it had been prior to the Victory Tax, as not including individuals in the states of the union.

The states of the union are then seen to be included in the terms "contiguous countries", "certain foreign countries" and "foreign countries and possessions of the United States".  This shows that every state of the union is foreign to the United States.  Those taxed under I.R.C. 211(a) must then be those living in a state of the union and working for government or one of its agencies - drawing income from "sources within the United States".

But because Congress failed to make it generally known that the Victory Tax was no longer in effect, people did not know to discontinue the withholding begun for the Victory Tax.  One was then considered as being a volunteer in paying income tax.

The scope of the I.R.C. never targeted all individuals in the union.  Only for a brief period, and under war powers, were all individuals made subject to taxation of income.  The repeal of the Victory Tax means the scope of what is taxed was restored to its original intent, and individuals in the states of the union do not have to pay taxes on their incomes.  And as the Victory Tax was the only act to have levied any such tax, the scope of taxation has never again expanded to include the whole of The United States of America.


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[Act Oct. 21, 1942, 4:30 p. m., E. W. T., c. 619, 56 Stat. 234, 884]


Part I--Rate and Computation of Tax


There shall be levied, collected, and paid for each taxable year beginning after December 31, 1942, a victory tax of 5 per centum upon the victory tax net income of every individual (other than a nonresident alien subject to the tax imposed by section 211 (a)).

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Supplement H--Nonresident Alien Individuals


(A) IMPOSITION OF TAX.--There shall be levied, collected, and paid for each taxable year, in lieu of the tax imposed by sections 11 and 12, upon the amount received, by every nonresident alien individual not engaged in trade or business within the United States and not having an office or place of business therein, from sources within the United States as interest (except interest on deposits with persons carrying on the banking business), dividends, rents, salaries, wages, premiums, annuities, compensations, remuneration's, emoluments, or other fixed or determinable annual or periodical gains, profits, and income, a tax of 10 per centum of such amount, except that such rate shall be reduced, in the case of a resident of a contiguous country, to such rate (not less than 5 per centum) as may be provided by treaty with such country.

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[Act May 29, 1944, 7 p. m., E. W. T., c. 210, 58 Stat. 234.]

(a) In general.
Subchapter D of Chapter 1 (relating to the victory tax) is repealed.
(b) Technical amendments.
(1) Section 3 (relating to classification of provisions) is amended by striking out the following:
"Subchapter D--Victory tax on individuals, divided into parts and sections."
(2) Section 56(f) (cross reference) is amended by striking out ", 144, and Part II of Subchapter D" and inserting in lieu thereof "and 144".
(3) Section 103 (relating to rates of tax on citizens and corporations of certain foreign countries) is amended by striking out "and 450" wherever appearing therein and inserting in lieu thereof "and 400".
(4) Section 131(a) (relating to taxes of foreign countries and possessions of the United States) is amended by striking out "or section 450".
(5) Section 131(i) (relating to tax withheld at source) is amended by striking out "466(e)" and by inserting in lieu thereof "35".
(6) Section 145(e) (cross reference) is amended to read as follows: [remainder of section omitted]

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Contiguous countries:

"Especially in the United States, where from our position as a confederation of independent sovereignties, contiguous, but each with its distinctive municipal law of divorce, the necessity for such a rule of comity becomes manifest." Cox v. Adams, 2 Ga. 158, quoted by Herron et al. v. Passailgue, 110 So. 539 (Oct. 27, 1926) [Cited by Florida Words and Phrases, Comity of Nations.] [Emphasis added.]


Notice also the usage of 'contiguous' from Title 49, Section 3170:

United States Code
                                         AND INTERNATIONAL FUEL TAX AGREEMENT

49 USC Sec. 31701. Definitions
In this chapter -

  1. ''commercial motor vehicle'', with respect to -

    A) the International Registration Plan, has the same meaning given the term ''apportionable vehicle'' under the Plan; and
    B) the International Fuel Tax Agreement, has the same meaning given the term ''qualified motor vehicle'' under the Agreement.

  2. ''fuel use tax'' means a tax imposed on or measured by the consumption of fuel in a motor vehicle.
  3. ''International Fuel Tax Agreement'' means the interstate agreement on collecting and distributing fuel use taxes paid by motor carriers, developed under the auspices of the National Governors' Association.
  4. ''International Registration Plan'' means the interstate agreement on apportioning vehicle registration fees paid by motor carriers, developed by the American Association of Motor Vehicle Administrators.
  5. ''Regional Fuel Tax Agreement'' means the interstate agreement on collecting and distributing fuel use taxes paid by motor carriers in the States of Maine, Vermont, and New Hampshire.
  6. ''State'' means the 48 contiguous States and the District of Columbia.

[Emphasis added.]