The Victory Tax was added to the House Revenue Bill by the Senate Finance Committee, it was not in the original proposal. However, it provided Congress with a way to blend the provisions of the "gross income" tax table (Supplement T), which in reality only applied to sole-proprietors and small financial investors, with the "wages" earned by common law employees. In order to accomplish it, with the least amount of objections, they name the tax something other than "income" and provide a convenient way for the employees to pay the tax. From the Senate Committee Report Number 1683, attached to H.R. 7378, The Revenue Bill of 1942, under the heading "II. Victory Tax", it is explained by Chairman George:

"The bill imposes a Victory tax of 5 percent upon the Victory tax net income in excess of $624 for each taxable year beginning after December 31, 1942. In the case of a husband and wife filing a joint return, if the Victory tax net income of one of the spouses is not less than $624 and that of the other is less that such sum, the aggregate specific exemption of both spouses is $624 plus the Victory tax net income of the spouse having a Victory tax net income of less than $624.

The Victory tax net income consists of the gross income (excluding capital gains) less expenses and other allowable deductions connected with a trade or business, or incurred in the production or collection of income, or for the management, conservation, or maintenance of property held for the production of income. In the case a taxpayer elects to compute his tax on the simplified form, Victory tax net income is defined as the gross income for the year." [The simplified from was a reference to "Supplement T"]

Senator Taft points out the change created by the terminology now used in describing "income", and the relationship of that change to the average American worker. His statements are recorded on page 7988 of the Congressional Record dated October 9, 1942, he says:

"I am sorry to have to say that the Senator from California is entirely wrong in his figures. The estimates upon which the tax bill is based show that the total net income of the people of the United States is $95,000,000,000. Of that amount $36,000,000,000 is not returned at all under the net-income tax. It is not in the form of exemptions or anything else.

In addition to that, there is represented by exemptions, $28,000,000,000. So under the bill as passed by the House, without the Victory tax, $64,000,000,000 of the total net income of $95,000,000,000 does not pay one cent of tax, and I do not think that under a net-income tax provision it ever will pay any tax. The net income tax is not an effective method of reaching that great volume of income …"

"I have not rechecked the figures, but under the bill as it passed the House, which is substantially the same as the Senate committee bill, 26,000,000 people will make income-tax returns in 1943. That is only one-half of the income receivers of the country. The other 27,000,000 people, who do not make any returns under the income tax law, have this $36,000,000,000 of income. That is how it is accounted for. Personally I have great difficulty in understanding why there can be so many people who do not make returns, but that is the result of all the figures which have been presented to the committee."

In other words, at this point in time, members of Congress believed that the term "income" was a reference not only to "gains and profits" derived from business and financial transactions, but also to the wages employees received for their labors. Even though Senator Taft admitted that such could not be the case under a net-income tax provision, most agreed that the tax should be levied as a separate Victory tax.

Congressional Record-Senate Volume 88, October 6, 1942, page 7797.  Senator George of Georgia, Chairman of the Senate Finance Committee
 “The bill further broadens the individual income-tax base by reducing the personal exemption for a married persons, or head of a family, from $1,500 to $1,200, and in the case of a single person from $750. to $500….It is estimated that the reduction in personal exemptions will add approximately 7,000,000 new taxpayers….The bill levies a victory tax of 5 percent on all income in excess of $624 received during the year by individuals from salaries, wages, and other compensation for personal services, dividends, interest, annuities and net profit from business or profession….It is estimated that this tax will add an additional eighteen and one-half million taxpayers, who otherwise would pay no tax directly to the Federal Government.  Without the victory tax, it is estimated, there will be twenty-seven and one-half million taxpayers.  Thus, under the regular income tax and the victory tax there will be a total of 46,000,000 taxpayers.”

Congressional Record-Senate Volume 88, October 6, 1942, page 7799.  Senator George of Georgia
 “The $624 exemption is given both to single and to married persons.  That is a matter of convenience, and almost of necessity, I should say, because the victory tax is accompanied by a withholding tax.”

The Revenue Bill of 1942 further reduced the exemption, added a Victory Tax on “gross income” of $624 or more and instituted the withholding provisions; all in the name of preventing inflation while creating inflation through deficit spending and increased taxes.

Congressional Record Volume 88:

Part 11, INDEX: House Bills 7359-7397, H.R, 7378

Part 11, INDEX: "Income tax", "Revenue", "Taxation"

Part 5, pgs. 6252-80, 6317-50

Part 6, pgs. 7689-90, 7792-7852, 7879-7912, 7919-49, 7980-8018, 8058-63

Part 7, pgs. 8441-81, 8997-99, 9396

Part 10, Appendix pgs. A-3793-99, "Analysis of the 15 Rev. Measures Since 1933"

House Report Number 2333, Serial Set No. 10664

Senate Report Number 1631, parts 1&2, Serial Set No. 10658