The United States Revenue Act of 1921 (ch. 136, 42 Stat. 227, November 23, 1921) was the first Republican tax reduction following their landslide victory in the 1920 federal elections. New Secretary of the Treasury Andrew Mellon argued that significant tax reduction was necessary in order to spur economic expansion and restore prosperity.
The legislation repealed the excess profits tax imposed during World War I, as well as "the transportation taxes, some luxury and other taxes, reduces slightly the maximum surtaxes upon individual incomes and increases somewhat the personal exemptions of heads of families and dependents, permits net losses of one year to be offset against net income of following years, and provides for the final settlement of tax cases besides making some other changes in the previous statute."[1][2] The top marginal rate on individuals fell from 73 to 58 percent by 1922, and preferential treatment for capital gains was introduced at a rate of 12.5 percent. Mellon had hoped for more significant tax reduction.