The Second World War cost approximately 304 billion dollars. The Roosevelt Administration, fresh from the complexities of creating the New Deal, paid the bill through an equally complex mix of taxation and borrowing.
Before the war, the majority of Americans paid no income tax, because the median wage was $1,231 (1939), but the personal tax exemption was up to $1,500. The Revenue Act of 1942 changed that, by lowering the tax exemption to $624 a year. Immediately, 13 million new taxpayers, and seven billion new tax dollars, were found. Paying your taxes became patriotic, as exemplified by Irving Berlin's flag-waving 1943 hit, "I Paid My Income Tax Today!" And there was more money to come, because many of those new (and old) taxpayers would soon be earning more, much more, from the higher wages paid by war-related industries, which collected taxes through withholding for the first time in American history.
To stimulate war production, those same industrial employers received unprecedented help from the government. 1940 legislation allowed full amortization of war-related plant and equipment investments over just five years. Corporations were thus able to shelter otherwise taxable profits. Anti-trust prosecutions were eased at the direction of the President, while military procurement agencies issued contracts on a cost-plus basis, with guaranteed profits for the contractor. It was a system, in the words of historian David Kennedy, "…beyond the most avaricious monopolist's dreams."
It worked. Corporate profits went from $6.4 billion in 1940 to $11 billion in 1944, while the machines to win the war got made in unbelievable abundance. The money-raising system worked so well, in fact, that the government worried too much money would cause inflation. Rationing some commodities and instituting wage and price controls were among the ways the administration kept that from happening.
Financing to pay for the war came mostly by borrowing from the American people through the sale of war bonds, which raised about $50 billion. Another $150 billion came from financial institutions. During the war, commercial banks alone increased their Treasuries holdings from $1 billion to $24 billion.