Funding the Civil War: The First Income Tax

The monumental task of waging the American Civil War required nearly unlimited funds-funds that the United States did not have. Early in the war, President Abraham Lincoln was so concerned about the need to supply his troops that he asked the members of his cabinet if the president had constitutional authority to impose a tax. He soon got his answer, and the Revenue Act of 1861 was passed. It was a 3 percent tax on incomes over $800 a year, and defined "income" as monies "derived from any kind of property, or from any profession, trade, employment, or vocation." The Revenue Act also placed tariffs on some imported goods and real estate. Lincoln created the Bureau of Internal Revenue, along with tax assessors and collectors, to manage and enforce the tax law. In later years, subsequent tax laws revised the initial conditions, until the tax was declared unconstitutional in 1872.