USA Coin Album: A Taxing Situation

Posted on 11/9/2021

Special wartime taxes led to higher mintages.

The beautiful US silver coin types that debuted in 1916 are perpetual favorites with collectors. Fortunately, coin production soared about that same time and for the next several years, providing numismatists the opportunity to own high-grade examples of these lovely designs. The Lincoln Cent and Indian Head/Buffalo Nickel were likewise recent additions to our coinage lineup, and the hobby has similarly benefited from the great availability of Mint State pieces dated 1916-20.

In 1918 the Philadelphia Mint set a record for cent production, only to exceed it the following
year. The mintage of 1919-S cents was a record for the San Francisco Mint that stood until 1943.
Click images to enlarge

In searching for a reason why mintages were so great during these years, the obvious answer is that the heightened economic activity of World War I created a greater demand for coins. As they would again during an even larger war a quarter century later, American agriculture and industry sustained the warring nations. Though the US didn’t enter the conflict officially until April of 1917, it began providing food and weapons to the European combatants as early as 1914. Neutral at first, the USA gradually swung toward the Allied Nations of Britain, France, Italy and Russia and against the Central Powers of Germany, Austria and the Ottoman Empire.

It’s only natural that all this accelerated production would result in more spending and a greater need for coins, as explained in the Annual Report of the Director of the Mint for Fiscal Year 1918, covering the period July 1, 1917 through June 30, 1918:

The fiscal year 1918 was for the Mint Service the most active in its history, the three coinage mints at Philadelphia, San Francisco and Denver working 16 to 24 hours per day for the greater part of the year to keep up with the demand for coin of denominations below the dollar.

The unprecedented demand for fractional coin is doubtless due to war activities — general acceleration of business transactions requiring more frequent settlements; larger camp activities, etc.

This statement by Mint Director Raymond T. Baker addressed the primary reason for accelerated minting during the war years, but the war ended with an armistice on November 11, 1918. Why then did mintages remain so high through 1920? In his report Baker also attributed the great need for small coins to another cause, one that is quite revealing: “Internal revenue taxes on amusement entrance fees and on numerous other services, as well as increased street-car fares and additions to other prices, required many one-cent pieces.”

Indeed, the imposition of wartime emergency excise taxes on so many small purchases and services resulted in transactions of uneven totals. A previously five-cent or 20-cent sale had become seven cents or 23 cents, respectively — and these taxes didn’t end with the cessation of hostilities. They lingered for another couple of years while the federal government struggled with the high debt incurred during the war years. Thus, large numbers of fractional coins were needed until such time as these wartime measures expired or were repealed.

The Philadelphia Mint coined more than 60 million nickels in 1920, but this production
plunged to just 10.6 million pieces in 1921 and was suspended altogether in 1922.
Click images to enlarge

Following is a rundown of the major items subject to temporary taxation starting with America’s entry into the war: Among the new charges a 3% tax was imposed on the sale of cars, player pianos, phonographs, records, jewelry (both real and imitation), sporting goods and cameras. A 2% tax was charged for perfumes, toiletries, patent medicines and chewing gum. Finally, motion picture film was taxed at the rate of 0.25 to 0.5% per foot (the distinction between these last two rates is not explained). Attendance at a movie theater carried a tax of three cents for adults and two cents for children. These figures worked out to be about 10% of ticket prices, making the opportunity to enjoy Charlie Chaplin or Mary Pickford something of a luxury.

The mintage of 1921(P) cents was just about an eighth of what it had been in 1920,
and it was not until 1923 that Philly again coined cents.
Click images to enlarge

Remember, this was a time before state sales taxes, as these weren’t imposed until the economic crisis of the Great Depression, so Americans were used to paying exactly the price listed for each item. Suddenly, businesses had to have much more change in their cash drawers to accommodate so many odd totals, and this is what made many of the 1916-20 coins so plentiful a century later.

I wasn’t able to determine exactly when the temporary excise taxes were repealed or expired, but it’s an even-money bet that it was sometime during 1920. By 1921 there was already a vast reserve of coins still undistributed, and the US Mint nearly ceased producing coins altogether after the opening months of that year. For the balance of 1921 coining activity was limited almost solely to the production of silver dollars required to replace those recently melted under the Pittman Act of 1918.

David W. Lange's column, “USA Coin Album,” appears monthly in The Numismatist, the official publication of the American Numismatic Association.

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