611. Government Method of Computing the Tax.-The method of computing the tax suggested in the instructions sent out by the United States government consists in computing the normal tax and the surtax separately and then adding the two.

The normal taxes under the Acts of 1916 and 1917 are computed separately and added to find the total normal tax.

612. Computing the Normal Tax. To compute the normal tax of a single person subtract $1000 from his net income and take 2% of the remainder. This gives his normal tax under the act of 1917. Then subtract $3000 from his income and take 2% of the remainder. This gives his normal tax under the law of 1916. The sum of these two is his total normal tax. In the case of a married person subtract the amounts indicated in §§ 606, 607.

613. Computing the Surtax. The method of computing the surtax is best shown by an example.

Find the surtax on a net income of $114,000.

From the table of total surtax we find that the surtax on $100,000 is $12,300. We also find in the table that the total surtax rate on incomes between $100,000 and $150,000 is 27%. Hence we take 27% of the amount by which the income exceeds $100,000, namely of $14,000.

Surtax on $100,000 (by table) = $12,300

Surtax on 14,000 (27%)

Total surtax

= 3,780

$16,080

Example 1. Find the combined income tax under the acts of 1916 and 1917 of a single person having a net income of $87,000.

Example 2. A married person having four dependent children has a net income of $42,000. Find his tax.

PROBLEMS

1. A married person with three dependent children has an annual income of $47,500. Find his income tax under the act of 1916 and also his combined tax under the acts of 1916 and 1917.

2. Find the combined income tax of a single person under the acts of 1916 and 1917, if his annual income is $6000. Find the average rate on his whole income.

3. Find the tax of a single person on $79,000 under the acts of 1916 and 1917. Find the average rate on the whole income.

4. Find the tax of a single person on $500,000 under the acts of 1916 and 1917. Find the average rate on the whole income.

5. Compare the results in examples 7, 8, 9 to see how the average rate of tax increases as the income increases under the combined acts.

6. What is the income tax of a single person on a yearly income of $6000 under the act of 1916? What is the average rate of tax on his whole income?

7. What is the income tax of a single person on $79,000 under the act of 1916? What is the average rate of tax on his whole income?

8. What is the income tax of a single person on a yearly income of $500,000 under the act of 1916? What is the average rate on his whole income?

9. Compare examples 7, 8, 9 to see how the average tax rate increases under the act of 1916 as the income increases.

10. Compute the surtax table in the last column on page 444. Suggestion. The total surtax on $40,000 is found as follows:

CHAPTER XLIII

UNITED STATES CUSTOMS

614. Indirect Taxes. - Indirect taxes consist of internal revenue taxes and import duties.

615. Internal Revenue Tax. For every gallon of alcohol distilled and sold in this country a tax is paid to the United States government. This is called an internal revenue tax. A similar tax is paid on fermented liquor, cigars, and a few other articles.

616. Import Duty. Many different kinds of goods bought in foreign countries and brought into the United States are subject to a tax as they enter this country.

617. Kinds of Import Duty. - The tax so paid is called United States customs or import duty. Import duties are specific and ad valorem.

618. Specific Duty. — A specific duty is a fixed amount to be paid on a certain kind of article regardless of the price at which it was bought.

Thus, men's kid gloves of certain grade pay a duty of $2.50 per dozen pairs.

619. Ad Valorem Duties. An ad valorem duty is fixed as so many per cent of the price actually paid for the goods in the country from which the goods are imported.

Ad valorem duties are not computed on fractions of a dollar. If the cents are less than fifty they are neglected, and if fifty or more they are considered an additional dollar.

Thus, imported ready-made woolen clothing is subject to a tax of 35% of the price at which they were bought in the foreign country.

Specific duties are usually levied on goods of fairly uniform value. Ad valorem duties are levied on goods whose value varies greatly.

Thus, rugs

or carpets vary greatly in price per square yard; and a specific duty might be exceedingly high on the cheaper grades, while it would be insignificant on the very expensive grades.

620. Value of Goods, How Determined. When goods are imported, an invoice is prepared by the seller in the foreign country specifying the kind of goods, the amount of them, and the exact price paid for them in the foreign money. In case of invoices amounting to more than $100 a United States consul or other agent must certify that the invoice is genuine. A copy of the certified invoice is forwarded by the consul to the collector of the United States port to which the goods are shipped. Such an invoice is taken as prima facie evidence of the value of the goods.

The value of foreign money in United States coin is determined by a statement issued every three months by the Secretary of the Treasury. Most of these are practically constant in value. For a list of values of foreign coins see § 541.

621. Tare, Leakage, Breakage. - Before specific duties are collected certain allowances are made. Tare is an allowance made for the weight of packing cases, etc. Leakage is an allowance made for the wastage of liquid goods. Breakage is allowed on certain goods which are liable to damage in shipment.

After allowances are made, for tare, leakage, and breakage, specific duties are charged on the amount remaining.

622. Ports of Entry. - The United States is divided into collection districts in which one or more cities are designated as ports of entry. In each port of entry there is a United States custom-house at which goods are examined and duties paid.

623. The Long Ton. — In determining weights the long ton (2240 lb.) is used in the United States custom-house. The centiweight is 112 lb.

624. The Tariff. The list giving the amount of duty on each article is called the tariff.

625. Port of Delivery. A place where imported goods may be released into the full control of the owner is called a port of delivery. Every port of entry is also a port of delivery, while many places which are not ports of entry are ports of delivery.

A vessel pays a certain tax proportional to her tonnage for the mere privilege of entering a port of entry. This is called tonnage.

626. Bonded Warehouse. In each port of entry there is a public store in which goods are received and examined. There is also a bonded warehouse in which dutiable goods may be stored, and from which they may be withdrawn on payment of the duty, storage, and cartage. Goods imported may be brought in on what is called warehouse entry, in which case they must be stored in the government warehouse; or on consumption entry, in which case the duty must be paid at once and the goods removed.

Goods may be withdrawn from a bonded warehouse for the purpose of reëxportation, in which case no duty is charged. There are also arrangements for removing the goods to a bonded factory, where they are manufactured into other goods for export. In this case no duty is charged. In the case of reëxportation of goods on which duty has been paid this is refunded less one per cent.

627. Customs Officers. In the larger ports of entry there are many general officers having charge of the various parts of the very large amount of work involved in the proper collection of duties on the goods imported. There are the Collector of Customs, the Naval Officer, the Surveyor, the Appraiser, etc.

628. Smuggling. - Bringing dutiable goods into the United States without paying full duty is called smuggling. This is a criminal act and is punishable by fines or imprisonment. Goods are smuggled by not entering them at the custom-house at all, in which case no duty is paid, or by making a false entry, in which case the government is defrauded of part of the tax.

Invoices are

629. Foreign and Domestic Systems of Measure. usually made out in the weights and measures of the country where the goods are bought. In case specific duties are imposed, the foreign weights or measures must be converted into United States weights and measures before the duties are computed. The metric system is in use in practically all European countries except England. See page 185.

A fraction of a unit of measure is neglected if it is less than and is regarded as a whole unit if equal to or greater than 1.