History of the Income Tax in the United States History of the Income Tax in the United States Source: Tax Foundation. The nation had few taxes in its early history. From 1791 to 1802, the United States government was supported by internal taxes on distilled spirits, carriages, refined sugar, tobacco and snuff, property sold at auction, corporate bonds, and slaves. The high cost of the War of 1812 brought about the nation's first sales taxes on gold, silverware, jewelry, and watches. In 1817, however, Congress did away with all internal taxes, relying on tariffs on imported goods to provide sufficient funds for running the government. In 1862, in order to support the Civil War effort, Congress enacted the nation's first income tax law. It was a forerunner of our modern income tax in that it was based on the principles of graduated, or progressive, taxation and of withholding income at the source. During the Civil War, a person earning from $600 to $10,000 per year paid tax at the rate of 3%. Those with incomes of more than $10,000 paid taxes at a higher rate.

Additional sales and excise taxes were added, and an “inheritance” tax also made its debut. In 1866, internal revenue collections reached their highest point in the nation's 90-year history—more than $310 million, an amount not reached again until 1911. The Act of 1862 established the office of Commissioner of Internal Revenue. The Commissioner was given the power to assess, levy, and collect taxes, and the right to enforce the tax laws through seizure of property and income and through prosecution. The powers and authority remain very much the same today. In 1868, Congress again focused its taxation efforts on tobacco and distilled spirits and eliminated the income tax in 1872. It had a short-lived revival in 1894 and 1895. In the latter year, the U.S. Supreme Court decided that the income tax was unconstitutional because it was not apportioned among the states in conformity with the Constitution. In 1913, the 16th Amendment to the Constitution made the income tax a permanent fixture in the U.S. tax system.

The amendment gave Congress legal authority to tax income and resulted in a revenue law that taxed incomes of both individuals and corporations. In fiscal year 1918, annual internal revenue collections for the first time passed the billion-dollar mark, rising to $5.4 billion by 1920. With the advent of World War II, employment increased, as did tax collections—to $7.3 billion. The withholding tax on wages was introduced in 1943 and was instrumental in increasing the number of taxpayers to 60 million and tax collections to $43 billion by 1945. In 1981, Congress enacted the largest tax cut in U.S. history, approximately $750 billion over six years. The tax reduction, however, was partially offset by two tax acts, in 1982 and 1984, that attempted to raise approximately $265 billion. On Oct. 22, 1986, President Reagan signed into law the Tax Reform Act of 1986, one of the most far-reaching reforms of the United States tax system since the adoption of the income tax.

The top tax rate on individual income was lowered from 50% to 28%, the lowest it had been since 1916. Tax preferences were eliminated to make up most of the revenue. In an attempt to remain revenue neutral, the act called for a $120 billion increase in business taxation and a corresponding decrease in individual taxation over a five-year period. Following what seemed to be a yearly tradition of new tax acts that began in 1986, the Revenue Reconciliation Act of 1990 was signed into law on Nov. 5, 1990. As with the '87, '88, and '89 acts, the 1990 act, while providing a number of substantive provisions, was small in comparison with the 1986 act. The emphasis of the 1990 act was increased taxes on the wealthy. On Aug. 10, 1993, President Clinton signed the Revenue Reconciliation Act of 1993 into law. The act's purpose was to reduce by approximately $496 billion the federal deficit that would otherwise accumulate in fiscal years 1994 through 1998.

In 1997, Clinton signed another tax act. The act, which cut taxes by $152 billion, included a cut in capital-gains tax for individuals, a $500 per child tax credit, and tax incentives for education. President George W. Bush signed a series of tax cuts into law. The largest was the Economic Growth and Tax Relief Reconciliation Act of 2001. It was estimated to save taxpayers $1.3 trillion over ten years, making it the third largest tax cut since World War II. The Bush tax cut created a new lowest rate, 10% for the first several thousand dollars earned. It also established a slow schedule of incremental tax cuts that would eventually double the child tax credit from $500 to $1,000, adjust brackets so that middle-income couples owed the same tax as comparable singles, cut the top four tax rates (28% to 25%; 31% to 28%; 36% to 33%; and 39.6% to 35%).

The Jobs and Growth Tax Relief and Reconciliation Act of 2003 accelerated the tax rate cuts that had been enacted in 2001, and temporarily reduced the tax rate on capital gains and dividends to 15%. In 2004, the U.S. was forced to eliminate a corporate tax provision that had been ruled illegal by the World Trade Organization. Along with that tax hike, Congress passed a cornucopia of tax breaks, which for individuals included an option to deduct the payment of whichever state taxes were higher, sales or income taxes. Two tax bills signed in 2005 and 2006 extended through 2010 the favorable rates on capital gains and dividends that had been enacted in 2003, raised the exemption levels for the Alternative Minimum Tax, and enacted new tax incentives designed to persuade individuals to save more for retirement. Historical Highlights of the IRS for Tax Pros Like - Click this link to Add this page to your bookmarks Share - Click this link to Share this page through email or social media Print - Click this link to Print this page Historical Highlights of the IRS 1862 - President Lincoln signed into law a revenue-raising measure to help pay for Civil War expenses.

The measure created a Commissioner of Internal Revenue and the nation's first income tax. It levied a 3 percent tax on incomes between $600 and $10,000 and a 5 percent tax on incomes of more than $10,000. 1867 - Heeding public opposition to the income tax, Congress cut the tax rate. From 1868 until 1913, 90 percent of all revenue came from taxes on liquor, beer, wine and tobacco. 1872 - Income tax repealed. 1894 - The Wilson Tariff Act revived the income tax and an income tax division within the Bureau of Internal Revenue was created. 1895 - Supreme Court ruled the new income tax unconstitutional on the grounds that it was a direct tax and not apportioned among the states on the basis of population. The income tax division was disbanded. 1909 - President Taft recommended Congress propose a constitutional amendment that would give the government the power to tax incomes without apportioning the burden among the states in line with population. Congress also levied a 1 percent tax on net corporate incomes of more than $5,000.

1913 - As the threat of war loomed, Wyoming became the 36th and last state needed to ratify the 16th Amendment. The amendment stated, "Congress shall have the power to lay and collect taxes on incomes, from whatever source derived, without apportionment among the several states, and without regard to any census or enumeration." Later, Congress adopted a 1 percent tax on net personal income of more than $3,000 with a surtax of 6 percent on incomes of more than $500,000. It also repealed the 1909 corporate income tax. The first Form 1040 was introduced. 1918 - The Revenue Act of 1918 raised even greater sums for the World War I effort. It codified all existing tax laws and imposed a progressive income-tax rate structure of up to 77 percent. 1919 - The states ratified the 18th Amendment, barring the manufacture, sale or transport of intoxicating beverages. Congress passed the Volstead Act, which gave the Commissioner of Internal Revenue the primary responsibility for enforcement of Prohibition. Eleven years later, the Department of Justice assumed primary prohibition enforcement duties.

1931 - The IRS Intelligence Unit used an undercover agent to gather evidence against gangster Al Capone. Capone was convicted of tax evasion and sentenced to 11 years. 1933 - Prohibition repealed. IRS again assumed responsibility for alcohol taxation the following year and for administering the National Firearms Act. Later, tobacco tax enforcement was added. 1942 - The Revenue Act of 1942, hailed by President Roosevelt as "the greatest tax bill in American history," passed Congress. It increased taxes and the number of Americans subject to the income tax. It also created deductions for medical and investment expenses. 1943 - Congress passed the Current Tax Payment Act, which required employers to withhold taxes from employees' wages and remit them quarterly. 1944 - Congress passed the Individual Income Tax Act, which created the standard deductions on Form 1040. 1952 - President Truman proposed his Reorganization Plan No. 1, which replaced the patronage system at the IRS with a career civil service system. It also decentralized service to taxpayers and sought to restore public confidence in the agency.

1953 - President Eisenhower endorsed Truman's reorganization plan and changed the name of the agency from the Bureau of Internal Revenue to the Internal Revenue Service. 1954 - The filing deadline for individual tax returns changed from March 15 to April 15. 1961 - The Computer Age began at IRS with the dedication of the National Computer Center at Martinsburg, W.Va. 1965 - IRS instituted its first toll-free telephone site. 1972 - The Alcohol, Tobacco and Firearms Division separated from the IRS to become the independent Bureau of Alcohol, Tobacco and Firearms. 1974 - Congress passed the Employee Retirement and Income Security Act, which gave regulatory responsibilities for employee benefit plans to the IRS. 1986 - Limited electronic filing began. President Reagan signed the Tax Reform Act, the most significant piece of tax legislation in 30 years. It contained 300 provisions and took three years to implement. The Act codified the federal tax laws for the third time since the Revenue Act of 1918. 1992 - Taxpayers who owed money were allowed to file returns electronically.

1998 - Congress passed the IRS Restructuring and Reform Act, which expanded taxpayer rights and called for reorganizing the agency into four operating divisions aligned according to taxpayer needs. 2000 - IRS enacted reforms, ending its geographic-based structure and instituting four major operating divisions: Wage and Investment, Small Business/Self-Employed, Large and Mid-Size Business and Tax Exempt and Government Entities. It was the most sweeping change at the IRS since the 1953 reorganization. 2001 - IRS administered a mid-year tax refund program to provide advance payments of a tax rate reduction. 2003 - IRS administered another mid-year refund program, this time providing an advance payment of an increase in the Child Tax Credit. Electronic filing reached a new high - 52.9 million tax returns, more than 40 percent of all individual returns. Page Last Reviewed or Updated: 06-Jul-2016 Our Agency Prologue: Selected Articles | National Archives Prologue: Selected Articles Winter 1986, Vol. 18, No. 4 Income Tax Records of the Civil War Years By Cynthia G.

Fox Ask any adult American the significance of April 15th and the response will almost always be, "income tax."&nbsp April 15th is a magic date, the last date that can appear on the outside of the envelope we mail to some remote tax center run by the all-powerful Internal Revenue Service.&nbsp By and large, we American taxpayers are an honest lot.&nbsp We fill out our 1040 forms, make out the check, are grateful to have tax time over, and pray we don't get audited. What else do we know about the income tax?&nbsp We were taught in school that the Constitution as originally written did not include permission for the federal government to levy direct taxes on individual citizens.&nbsp To correct this deficiency the sixteenth amendment was proposed and ratified on February 25, 1913, giving Congress the power to tax incomes "from whatever source derived."&nbsp Many people believe that this was the first income tax that Americans had to pay.&nbsp However, the first income tax was actually levied almost fifty-one years earlier by an act of Congress on July 1, 1862 (12 Stat.

432).&nbsp The records of that first income tax are a valuable source for family and local history. The Civil War income tax was the first tax paid on individual incomes by residents of the United States.&nbsp It was a "progressive" tax in that it initially levied a tax of 3 percent on annual incomes over $600 but less than $10,000 and a tax of 5 percent on any income over $10,000.&nbsp In 1864 the rates increased and the ceiling dropped so that incomes between $600 and $5,000 were taxed at 5 percent, with a 10 percent rate on the excess over $5,000.&nbsp Passed as an emergency measure to finance the Union cause in the Civil War, the first income tax generated approximately $55 million in government revenues during the war.&nbsp Paying the taxes was viewed as part of the patriotic war effort, and the whole country was proud when the merchant prince A. T. Stewart paid $400,000 in taxes on an income of $4 million.

1 Taxes were levied on residents of all states and territories not in rebellion.&nbsp In the South, some states operated under reconstruction governments while the war went on.&nbsp Virginia, for example, the site of the Confederate capital, was largely controlled by federal forces, and northern and western Virginians were subject to the income tax from the beginning.&nbsp States that seceded were included in the tax base as soon as Union troops established control.&nbsp Georgians paid income taxes in 1865 even though their state was not officially readmitted to the Union until 1870. The Civil War taxes were not immediately repealed at the end of the war but continued in force until 1872, when the Grant administration sponsored the repeal of most of the "emergency" taxes.&nbsp The tax on whiskey remained in force.&nbsp Between 1868 and 1881 the U.S. Supreme Court responded to challenges regarding the validity of the Civil War taxes on dividends, real estate, inheritances, and income tax by upholding the constitutionality of those taxes.

2 &nbsp Fifteen years later the Populists attempted to revive the income tax and Congress passed a law providing for a new 2 percent tax on incomes over $4,000.&nbsp But the Supreme Court surprised the nation, reversing its earlier decision and declaring the law unconstitutional in 1895.&nbsp This ruling, declaring that an income tax is a direct tax and therefore unconstitutional, led to the ratification of the sixteenth amendment in 1913. The Civil War income tax was only a small part of a very complicated system of federal duties, stamp taxes, and fees that the government collected from individuals and businesses.&nbsp David A. Wells, appointed chairman of the U.S.

Revenue Commission in 1865, described the tax structure as being based on a principle "akin to that recommended to the traditionary Irishman on his visit to Donnybrook Fair, 'whenever you see a head, hit it.'"&nbsp Congress was guided, Wells wrote, by a similar principle, "whenever you find an article, a product, a trade, a profession, or a source of income, tax it!" 3 &nbsp Wells believed that the universal system was based on nothing in past experience and would likely never be repeated.&nbsp In fact, the 1862 tax law served as the basis for the present internal revenue system, both in articles taxed and in organization for collecting taxes.

Congress passed the Internal Revenue Act on July 1, 1862, "to provide Internal Revenue to support the Government and to pay Interest on the Public Debt," but the taxes, including the income tax, were not actually levied until September 1, 1862.&nbsp Like tax legislation today, the 1862 law was extremely complicated.&nbsp Monthly specific (or fixed) and ad valorem (a percentage of the market value) duties were placed on articles and products ranging from ale to zinc.&nbsp Monthly taxes were levied on gross receipts of transportation companies; interest paid on bonds; surplus funds accumulated by financial institutions and insurance companies; gross receipts from auction sales; and sales of slaughtered cattle, hogs, and sheep.&nbsp Annual licenses were required for bankers, auctioneers, wholesale and retail dealers, pawnbrokers, distillers, brewers, brokers, tobacconists, jugglers ("Every person who performs by sleight of hand shall be regarded as a juggler under this act."), confectioners, horse dealers, livery stable keepers, cattle brokers, tallow-chandlers and soapmakers, coal- oil distillers, peddlers, apothecaries, photographers, lawyers

, and physicians.&nbsp Hotels, inns, and taverns were classified according to the annual rent or estimated rent, from a first-class establishment with a yearly rental of $10,000 to an eighth-class hotel with a yearly rental of less than $100, and charged license fees of from $200 to $5 accordingly.&nbsp Eating houses paid $10 per year for a license, theaters $100, and circuses $50.&nbsp Bowling alleys and billiard rooms paid according to the number of alleys or tables belonging to or used in the building to be licensed.&nbsp Stamp duties were imposed on legal and business documents and on medicines, playing cards, and cosmetics.

4 The new Office of the Commissioner of Internal Revenue in the Treasury Department supervised the collection of taxes and duties and prepared regulations, instructions, directions, and forms used in assessing and collecting taxes.&nbsp President Abraham Lincoln issued a series of executive orders dividing all of the states and territories under Union control into collection districts.&nbsp The number of collection districts in a state or territory could be as few as one, as in the case of the Territory of New Mexico, but it could not exceed the number of its congressional representatives.&nbsp Subsequent executive orders altered collection districts in some of the states and territories either in number or in geographical coverage.&nbsp Lincoln also appointed a collector and an assessor for each district.&nbsp Local officials, or assistant assessors, compiled lists of taxpayers used by collectors to collect the taxes.

All persons, partnerships, firms, associations, and corporations submitted to the assistant assessor of their division a list showing the amount of their annual incomes, articles subject to special tax or duty, and the quantity of taxable goods made or sold.&nbsp The assistant assessors then compiled two alphabetical lists: (1) the names of persons or entities residing in the division who were liable for taxation and (2) the names of persons or entities residing outside the division who owned property in the division.&nbsp Under each name were recorded the value, assessment (or enumeration of taxable income or items), and the amount of duty or tax due. Reflecting the government's need for money and the difficulty of collecting income taxes, the Internal Revenue Act of June 30, 1864 (13 Stat.

223), raised tax rates and put some teeth into the law.&nbsp This act made it the duty of any person liable to the annual tax (anyone with an income in excess of $600 or owners of certain luxury items) to file a list of income and taxable property with the assistant assessor in the division in which he or she resided on or before the first Monday in May.&nbsp Failure to file on time resulted in the assistant assessor estimating a taxpayer's worth plus a penalty of an additional 25 percent of the tax due.&nbsp A false or fraudulent list or statement resulted in having the assessor or assistant assessor estimate the true value and set the tax due accordingly.&nbsp In addition, the fine was 100 percent of the tax.&nbsp From this assessment, the tax form specifically stated, "there can be no appeal."&nbsp The assessment lists were turned over to the collector of internal revenue, who then posted a notice in each county within the district.&nbsp In the notice he specified a time and place when he would be collecting the taxes due.

Similar to the familiar 1040 tax form, taxpayers submitted their lists of income and property on a Form 24, entitled "Detailed Statement of Income, Gains, and Profits."&nbsp The Civil War tax form included spaces for reporting income and listing deductions.&nbsp "Proper deductions" from income derived from business or trade included rent, insurance, freight and expressage, wages of employees, and other expenses.&nbsp Rental income from lands and buildings was reported separately.&nbsp The only proper deduction from income derived from the rent of lands was repairs to fences, while rent from buildings could be reduced by the cost of repairs and insurance.&nbsp Farm income from the sale of livestock and produce was taxed after deductions for labor, repairs, the farmer's livestock costs, insurance, and interest on encumberances.&nbsp Profits from the sale of property; interest collected on debts, dividends on any stock, capital, and bank deposits; and interest on U.S. bonds or any other source were taxable.&nbsp Minors with incomes exceeding $600 were also liable through their guardians.&nbsp In case something had been missed, the form included spaces to enter all other income.

There were four supplementary deductions authorized: losses on real estate; interest paid; national, state, and local taxes; and rent paid for a homestead.&nbsp In addition, all salaries of officers or payments to persons in service in any branch of the U. S. government were free of tax.&nbsp The 1862 tax law had not exempted federal salaries, and the Treasury Department had deducted the amount of the tax from the paychecks of federal employees.&nbsp On February 16, 1863, Roger B. Taney, Chief Justice of the U.S. Supreme Court, wrote to Secretary of the Treasury Salmon P. Chase complaining that deductions from the salaries of federal judges constituted a violation of the constitutional doctrine of separation of powers.&nbsp The secretary of the treasury forwarded the letter to the attorney general.&nbsp As a result, all federal salaries were exempt from taxation in the 1864 revision.&nbsp In 1872 the administrator of the estate of Abraham Lincoln applied for a refund of taxes improperly assessed on Lincoln's salary as president of the United States.

Schedule A of Form 24 listed certain categories of personal property that were subject to an annual tax.&nbsp Carriages of any size and shape not used exclusively in farming or in transporting merchandise were taxed from $1 to $6 depending on their value.&nbsp Also based on value, gold watches were taxed either $1 or $2 and pianofortes or other parlor musical instruments were taxed at either $2 or $4.&nbsp Billiard tables not licensed carried an annual tax of $10.&nbsp Gold and silver plate were taxed by the Troy ounce at 50 cents and 5 cents respectively.&nbsp Yachts and pleasure and racing boats were taxed based on tonnage, between $5 for 10 tons or less and $100 for more than 110 tons.

An act of December 24, 1872, abolished the offices of assessors and assistant assessors.&nbsp On May 20, 1873, these offices were closed and the records relating to the Civil War taxes were shipped to the commissioner of internal revenue in Washington, D.C.&nbsp Following the 1895 Supreme Court decision that declared income taxes unconstitutional, Congress approved a joint resolution requiring that income tax returns be destroyed.&nbsp The secretary of the treasury appointed a committee to carry out the congressional instructions.&nbsp The commissioner of internal revenue delivered all of the individual tax returns and collectors' lists of income tax paid to the committee on May 5, 1896.&nbsp The records were then burned.&nbsp Because the assessors' lists contained information on business licenses and other taxes, they were retained.&nbsp Some of these original assessment lists survived and are now part of the holdings of the National Archives. As part of an ongoing publications program, the assessment lists for the Civil War period are being converted to microfilm publications.

5 &nbsp The records from 34 states and territories are currently available on microfilm.&nbsp Most of the publications reproduce the records for the period 1862 to 1866.&nbsp However, for some of the territories there were so few records that all of the assessment lists have been included.&nbsp The records for the Territory of Montana, for example, cover the period 1864-1872, and the records for the Territory of New Mexico date from 1862 to 1874, with a gap in the records in 1872.&nbsp The lists are not complete for all collection districts, and there may be significant gaps like the one in the New Mexico records. The lists are bound into volumes, and they have been microfilmed in that order.&nbsp The lists are generally arranged by collection district, thereunder by divisions within the districts, and thereunder chronologically whenever possible.&nbsp In order to make the lists easier to use, descriptive pamphlets have been prepared that list counties included in each collection district.

The assessment lists are divided into three categories: annual, monthly, and special.&nbsp Entries in the annual and monthly lists are for taxes assessed and collected in those specific periods.&nbsp The special lists augment incomplete annual and monthly lists and include special taxes, such as a special income tax levied in October 1864.&nbsp In the descriptive pamphlets the three types of lists are identified by the symbols A (annual), M (monthly), and S (special). These records can prove very useful to local historians, family historians, and researchers interested in specific industries within a geographic area.&nbsp The lists usually provide the names of the persons or business firms liable for taxes, their addresses (city lists often include street addresses), the taxable period, pertinent remarks on the assessment, the article or occupation taxed, and a notation of payment.&nbsp Besides detailing revenue raised by the general income tax, these various lists show levies against many diverse items such as inheritances and gold watches as well as larger tax liabilities against capital stock, circulating bank notes, and businesses subject to excise duties.

Using the tax lists to determine the degree of an individual's wealth is relatively easy since the Statistics Bureau of the Treasury Department published tables showing the average cost of provisions, consumer goods, board, and rent by state in 1869.&nbsp These publications also provide information on average wages generally paid by profession or skill. 6 Take, for example, Baltimore banker Thomas Splicer, Jr., of 82 McCulloh Street in the first division of the third Maryland collection district.&nbsp Splicer had a taxable income of $7,750 in 1865.&nbsp He owned two gold watches, one of which was valued at more than $100, and a pianoforte valued at between $100 and $200. Splicer had also paid income tax on an inheritance of $2,700 during 1865.

7 &nbsp Splicer must have been wealthy.&nbsp According to the Treasury Department tables the average rent on a six-room house in Maryland was $10 per month.&nbsp Consumer goods and food were also very reasonable in Maryland.&nbsp Extra fine flour sold for $8 per barrel, roasted coffee was 35 cents per pound, beef was 15 cents per pound, butter was 40 cents per pound, eggs were 22 cents per dozen, coal was $8.50 per ton, medium quality satinets were 50 cents per yard, and men's heavy boots could be had for $5.25 a pair.&nbsp In 1865 gold sold for $145 per ounce.

Some information in the assessment lists is not duplicated elsewhere.&nbsp For example, persons who had no fixed address may not be included in census records.&nbsp Some of these individuals— traveling retail dealers and peddlers, for example— were required to obtain licenses under the Civil War tax laws.&nbsp The assessment list that shows Abraham Lincoln's taxes for 1864, for example, includes the names of several retail dealers whose addresses are "long boats."&nbsp These river and canal merchants may not have been enumerated in the census.&nbsp Similarly, itinerant peddlers are listed on monthly and special lists showing payment for retail licenses. Local business history is well documented in the assessment lists.&nbsp For example, the giant Anheuser-Busch Company, brewer of nearly one-third of all beer sold today in the United States, has its corporate headquarters at 721 Pestalozzi Street in St. Louis, Missouri.&nbsp The corporation dates from 1875, but the assessment lists for St. Louis show an E. Anheuser operating a brewery on Pestalozzi Street over a decade earlier.&nbsp By 1867 the lists show a G.

Busch paying the brewer's license fee at the same address, while Anheuser appears to have gone into liquor importation and soapmaking.&nbsp Anheuser had a daughter who married Gus Busch, and the business remains a family-owned operation to this day. Local historians should seriously consider the assessment lists as a source.&nbsp Take New Orleans under the Union occupation as an example.&nbsp By examining the annual license list for 1862 one can draw an image of life in that cosmopolitan city.&nbsp D. M. Hildreth's St. Louis Hotel between Chartres and Royal streets was a first-class place to stop while in the city.&nbsp For entertainment, one might attend the Varieties Theater on Gravier Street or visit E. B. Eastman's Exhibition at 1 Conti Alley.&nbsp For some quick cash, one might visit the pawnbroker C. Docteur at 145 Royal Street. The assessment lists also provide information about professionals and tradespeople in the city.&nbsp There were numerous physicians in New Orleans, including one named Mrs. Smith.

Perhaps not surprising during war time, there were a number of women engaging in retail business, running eating houses, and operating hotels, as well as one running an apothecary on Orleans Street.&nbsp On Bienville Street, two dentists had offices at #4 and #66 and between them, at #30, P. Giscion had his chocolate factory.&nbsp Along Chartres Street factories produced shoes and furniture.&nbsp The lists will even tell you which butcher occupied which booth at Treme Market. These income tax records can also be used in conjunction with later tax records.&nbsp The National Archives in Washington has records relating primarily to corporate and business taxes dating to 1910 and corporate assessment lists for 1909 to 1915.&nbsp The corporation assessment lists are available on microfilm as publication M667.

Post-Civil War income tax records, 1867-1873, are available in the National Archives field branches.&nbsp Several of the field branches have additional records relating to post-Civil War taxes.&nbsp The Denver Branch, for example, has original monthly assessment lists created by district collectors in what are now the states of Arizona, Colorado, New Mexico, and Wyoming as late as 1917.&nbsp Some of these records document miscellaneous and regular revenue taxes, mostly those imposed on the retail sale of liquor and the manufacture of tobacco products.&nbsp They also concern taxes on brewers, oleomargarine sales, and, after 1899, telephone messages.&nbsp Because the assessment lists include the reported net income of firms, they can be used to augment statistical studies of corporate profits and to compare the growth of companies engaged in like activities.&nbsp Many other field branches have similar records.

The Civil War income tax records are not only a valuable source of information for biographical, genealogical, and local history research but should also be considered when conducting regional and area studies of business and industry or quantitative studies of demographics during the 1860s.&nbsp They can be used in conjunction with census records, later tax records, and state and local records to document the growth of industries, shifting patterns of wealth, migration patterns, and even the incidence of women in the work force. Cynthia G. Fox is the Chief of the Military and Civil Records Unit of the National Archives and Records Administration. She received her Master of Arts in American History degree from East Carolina University. Notes 1. Samuel Eliot Morison and Henry Steele Commager, The Growth of the American Republic, Vol. 1 (1962), p. 748. 2. Pacific Insurance Company v. Soule (7 Wallace 433); Veazie Bank v. Femno (8 Wallace 533); Scholy v. Rezv (23 Wallace 331); and Springer v. U.S. (102 U.S. 586). 3.

Herbert Ronald Ferleger, David A. Wells and the American Revenue System, 1865-1870 (1942), p. 44. 4. For a full discussion of the law see Charles F. Estee, comp., The Excise Tax Law Approved July 1, 1862; and all Amendments (1863). 5.

The Internal Revenue assessment lists, 1862-1874, for the following states and territories are currently available as microfilm publications: M754, Alabama, 1865-1866, 6 rolls; M755, Arkansas, 1865-1866, 2 rolls; M756, California, 1862-1866, 3 rolls; M757, Colorado, 1862-1866, 3 rolls; M758, Connecticut, 1862-1866, 23 rolls; M759, Delaware, 1862-1866, 8 rolls; M760, District of Columbia, 1862-1866, 8 rolls; M761, Florida, 1865-1866, 1 roll; M762, Georgia, 1865-1866, 8 rolls; M763, Idaho, 1865-1866, 1 roll; M7

64, Illinois, 1862-1866, 63 rolls; M765, Indiana, 1862-1866, 42 rolls; M766, Iowa, 1862-1866, 16 rolls; M767, Kansas, 1862-1866, 3 rolls; M768, Kentucky, 1862-1866, 24 rolls; M769, Louisiana, 1863-1866, 10 rolls; M770, Maine, 1862-1866, 15 rolls; M771, Maryland, 1862-1866, 21 rolls; M773, Michigan, 1862-1866, 15 rolls; M775, Mississippi, 1865-1866, 3 rolls; M776, Missouri, 1862-66, 22 rolls; M777, Montana, 1

864-1872, 1 roll; M779, Nevada, 1863-1866, 2 rolls; M780, New Hampshire, 1862-1866, 10 rolls; M603, New Jersey, 1862-1866, rolls 1-17 (with New York); M782, New Mexico, 1862-1870, 1 roll; M603, New York, 1862- 1866, rolls 18-218 (with New Jersey); M784, North Carolina, 1864-1866, 2 rolls; M787, Pennsylvania, 1864-1866, 107 rolls; M788, Rhode Island, 1862-1866, 10 rolls; M789, South Carolina, 1864-1866, 2 rolls; M791, Texas, 1865- 186

6, 2 rolls; M792, Vermont, 1862-1866, 7 rolls; M793, Virginia, 1862-1866, 6 rolls; M795, West Virginia, 1862- 1866, 4 rolls.

6. There are two publications that are particularly useful. The first is Cost of Labor and Subsistence in the United States for 1869 as Compared with Previous Years, compiled by Edward Young and published in 1870. The second is entitled Special Report on Immigration, also compiled by Edward Young. This second report, published in 1871, was designed to provide cost-of-living information to newly arrived immigrants. It also includes information on the types of jobs available in the southern and western states. 7. Thomas Splicer, Sr., died March 12, 1864, leaving his son mortgaged real estate. Splicer sold his father's property to pay the debt. His share of the profits was $2,700. Articles published in Prologue do not necessarily represent the views of NARA or of any other agency of the United States Government. This page was last reviewed on August 15, 2016.

Lincoln imposes first federal income tax - Aug 05, 1861 - HISTORY.com Lincoln imposes first federal income tax Share this: Lincoln imposes first federal income tax Author Lincoln imposes first federal income tax URL Publisher A+E Networks On this day in 1861, Lincoln imposes the first federal income tax by signing the Revenue Act. Strapped for cash with which to pursue the Civil War, Lincoln and Congress agreed to impose a 3 percent tax on annual incomes over $800. As early as March 1861, Lincoln had begun to take stock of the federal government’s ability to wage war against the South. He sent letters to cabinet members Edward Bates, Gideon Welles and Salmon Chase requesting their opinions as to whether or not the president had the constitutional authority to “collect [such] duties.” According to documents housed and interpreted by the Library of Congress, Lincoln was particularly concerned about maintaining federal authority over collecting revenue from ports along the southeastern seaboard, which he worried, might fall under the control of the Confederacy.

The Revenue Act’s language was broadly written to define income as gain “derived from any kind of property, or from any professional trade, employment, or vocation carried on in the United States or elsewhere or from any source whatever.” According to the U.S. Treasury Department, the comparable minimum taxable income in 2003, after adjustments for inflation, would have been approximately $16,000. Congress repealed Lincoln’s tax law in 1871, but in 1909 passed the 16th Amendment, which set in place the federal income-tax system used today. Congress ratified the 16th Amendment in 1913. Related Videos A Brief History of Income Tax in America 2 • 1040.com Blog Like A New Kind of Tax Part 2: 1776–1900 With the winning of the Revolution, the American colonies became the United States – and taxation became a much more local issue. But to this point, taxation – whether British or home-grown – was pretty straightforward. Taxes were levied on sales of products or on property. The tariff, a tax on imports or exports – became a popular vehicle.

Taxing income, though, was still years away. The fledgling Congress struggled with running a new nation; just paying the bills was a work in progress in those early days. Meanwhile, the British were developing a nasty habit of stopping American ships and kidnapping our sailors to help them fight Napoleon. Eventually, it boiled over into war. The year was 1812. In 1815, Secretary of the Treasury Alexander Dallas thought up the first American income tax. He needed to raise more money for the war effort. Britain had adopted an income tax during the Napoleonic wars, and Dallas thought it could work during wartime here. The big hitch in the U.S. was that the law said that any direct tax had to be apportioned according to each state’s population. Dallas thought the income tax got around this provision because it was indirect, not direct taxation. But he never got the chance to try it. The War of 1812 ended before the income tax could be enacted. In the ensuing years, the issue of slavery became the undercurrent that drove most federal policy. While administrations continued to tweak tariffs and other trade-related measures, a North-South tug of war was slowly developing in economic and social terms.

By 1860 that tug of war would quickly morph into the real thing. The Unthinkable Becomes Reality Between 1861 and 1865, American fought American in one of the most gruesome military campaigns on the planet. We’ll leave the political dynamics to the real historians. Suffice to say the American Civil War pitted the industrialized North against a largely agrarian South. Both sides needed to raise more money to finance their military aims – a contest clearly won by the Union. They sold war bonds to aid the war effort, with sales over $3 billion. But they needed more. Enter the income tax. It was passed in 1861 to help assure the financial community that the Union would have the money to pay interest on the war bonds it sold. The Constitution demanded that any direct tax be apportioned among states according to population. That meant the tax would be regressive; lower-density states and poor states could face a bigger burden than highly populated states. The first income tax was simple: A 3 percent tax on annual incomes over $800. Most wage earners of the time were exempted.

The income tax was expanded and graduated in 1862, exempting the first $600, setting a 3 percent rate on income between $600 and $10,000, and placing a 5 percent tax rate on income over $10,000. The rising cost of the war – even for the Union – led Congress to expand the income tax again in 1864. By the end of the war, the North had raised over 20 percent of its war revenue through taxation; the South had managed just 5 percent. And with the end of hostilities, the first American income tax faded into history in 1872. By 1894, an income tax was back on the table. This time it was packaged in the Wilson-Gorman Tariff bill and it was pretty straightforward, putting a 2 percent tax rate on incomes over $4,000. But just one year later, it was struck down by the Supreme Court. The Court ruled that a tax on the income derived from land – such as rent or real estate sales – constituted a direct tax on that land, and therefore should be apportioned.

They also said the income from state or municipal bonds couldn’t be taxed – a matter of state powers vs. the federal government. The Court’s decision silenced the issue of an income tax for the remainder of the 19th century. But the 20th century was about to dawn, and that would carry with it the beginnings of a new American tax structure. Our Documents - 16th Amendment to the U.S. Constitution: Federal Income Tax (1913) 16th Amendment to the U.S. Constitution: Federal Income Tax (1913) Citation: The 16th Amendment, March 15, 1913; Ratified Amendments, 1795-1992; General Records of the United States Government; Record Group 11; National Archives. Income Tax Form, 1913. Record Group 56, General Records of the Department of the Treasury, Entry 357A, Internal Revenue Division, Income Tax Forms. How to use citation info.

(on Archives.gov) Passed by Congress on July 2, 1909, and ratified February 3, 1913, the 16th amendment established Congress's right to impose a Federal income tax. Far-reaching in its social as well as its economic impact, the income tax amendment became part of the Constitution by a curious series of events culminating in a bit of political maneuvering that went awry. The financial requirements of the Civil War prompted the first American income tax in 1861. At first, Congress placed a flat 3-percent tax on all incomes over $800 and later modified this principle to include a graduated tax. Congress repealed the income tax in 1872, but the concept did not disappear. After the Civil War, the growing industrial and financial markets of the eastern United States generally prospered. But the farmers of the south and west suffered from low prices for their farm products, while they were forced to pay high prices for manufactured goods.

Throughout the 1860s, 1870s, and 1880s, farmers formed such political organizations as the Grange, the Greenback Party, the National Farmers’ Alliance, and the People’s (Populist) Party. All of these groups advocated many reforms ( see the Interstate Commerce Act ) considered radical for the times, including a graduated income tax. In 1894, as part of a high tariff bill, Congress enacted a 2-percent tax on income over $4,000. The tax was almost immediately struck down by a five-to-four decision of the Supreme Court, even though the Court had upheld the constitutionality of the Civil War tax as recently as 1881. Although farm organizations denounced the Court’s decision as a prime example of the alliance of government and business against the farmer, a general return of prosperity around the turn of the century softened the demand for reform. Democratic Party Platforms under the leadership of three-time Presidential candidate William Jennings Bryan, however, consistently included an income tax plank, and the progressive wing of the Republican Party also espoused the concept. In 1909 progressives in Congress again attached a provision for an income tax to a tariff bill.

Conservatives, hoping to kill the idea for good, proposed a constitutional amendment enacting such a tax; they believed an amendment would never received ratification by three-fourths of the states. Much to their surprise, the amendment was ratified by one state legislature after another, and on February 25, 1913, with the certification by Secretary of State Philander C. Knox, the 16th amendment took effect. Yet in 1913, due to generous exemptions and deductions, less than 1 percent of the population paid income taxes at the rate of only 1 percent of net income. This document settled the constitutional question of how to tax income and, by so doing, effected dramatic changes in the American way of life. (Information excerpted from Milestone Documents in the National Archives [Washington, DC: National Archives and Records Administration, 1995] pp. 69–73.) This Day in History for 8/5/16 - WMTR AM This Day in History for 8/5/16 On this day in history... 1620 – The Mayflower departs from Southampton, England on its first attempt to reach North America.

1861 – In order to help pay for the Civil War war effort, the United States government levies the first income tax as part of the Revenue Act of 1861 (3% of all incomes over US $800; and it was rescinded in 1872). By William Halsall - , Public Domain, Category Tax History Project -- The Civil War Tax History Museum: 1861-1865 The Civil War The Civil War represented a watershed moment in the history of American taxation. The quick, limited engagement both sides confidently predicted soon proved a chimera. Instead, the exigencies of protracted, destructive warfare ­ engulfing private property and civilian populations as well as commissioned combatants ­ demanded innovations in government financing. While the outcome of the conflict may be attributed to any number of contingent factors, the varying fiscal strategies undertaken by the Union and Confederate governments undoubtedly influenced the capacity of both societies to sustain the war effort. North and South employed markedly different approaches. The North's proved more efficacious in the long run. Confederate War Financing The antebellum south enjoyed one of the lightest tax burdens of all contemporary civilized societies. Local or state governments assessed all obligations.

By contrast, the hastily assembled Confederate government lacked the bureaucratic infrastructure to levy or collect internal taxes. Its citizens possessed neither a tradition of compliance nor a means to remit payment. Land and slaves comprised the bulk of southern capital; liquid forms of wealth like specie or paper currency were hard to come by in a predominantly agrarian region. Efforts to raise war revenue through various methods of taxation proved ineffective. The Confederate Congress enacted a minor tariff in 1861, but it contributed only $3.5 million in four years. That same year, Congress implemented a small direct tax (0.5 percent) on real and personal property. But the government in Richmond was forced to rely on the individual states to collect the levy. Reprising the scenario played out during the Revolutionary War, most states did not collect the tax at all, preferring to meet their quota by borrowing money or printing state notes to cover it. The Davis administration turned to loans to finance the initial bulk of war debts. Riding a wave of patriotic enthusiasm in 1861, the Treasury earned $15 million selling out their first bond issue. The second issue, however, consisting of $100 million in 8 percent yield bonds, sold slowly.

Few southerners had the cash to purchase them, but in addition the year-end 12 percent inflation rate threatened to negate any promise of real financial return. It fell to investors to buy up the remainder of the 8 percent bonds, which they purchased with newly minted Confederate Treasury notes. By necessity rather than choice, the South turned to the printing press to pay most of its bills. In its first year, the Confederate government derived 75 percent of its total revenue from Treasury notes, less than 25 percent from bonds (purchased, of course, with the notes), and under 2 percent from taxes. While the proportion of the latter two would increase slightly in later years, the foundation of Confederate war financing consisted of over $1.5 billion in paper dollars that began depreciating before the ink had a chance to dry. By refusing to establish the notes as compulsory legal tender, Treasury officials hoped to avoid undermining confidence in the currency. They preferred that the currency be backed by public confidence in the Confederacy’s survival (notes were to be redeemable in specie at face value within two years of the end of the war).

This being the case, various state, county, and city notes also circulated widely, diluting the medium further; the fact that these poorly printed bills were easily counterfeited did not help matters. Ironically, the Confederate decision to turn to paper money in lieu of a system of internal taxation abetted the most odious, regressive form of de facto taxation southern society endured: runaway inflation, appearing in the wake of military reversals in 1862, and topping 9,000 percent by war’s end. By the spring of 1863, the crushing burden of inflation motivated Richmond to come up with an alternative to fiat money. In April, they followed the Union’s lead and enacted comprehensive legislation that included a progressive income tax, an 8 percent levy on certain goods held for sale, excise, and license duties, and a 10 percent profits tax on wholesalers. These provisions also included a 10 percent tax-in-kind on agricultural products. The latter burdened yeoman more than the progressive income tax encumbered urban salaried workers, since laborers could remit depreciated currency to meet their obligations.

Adding to the inequity, the law exempted some of the most lucrative property owned by wealthy planters ­ their slaves ­ from assessment. Lawmakers considered a tax on slaves to be a direct tax, constitutionally permissible only after an apportionment on the basis of population. Since the war precluded any opportunity to count heads, they concluded that no direct tax was possible. Accumulating war debts and heightened condemnation of a "rich man’s war, poor man’s fight" led to revision of the tax law in February 1864, which suspended the requirement for a census-based apportionment of direct taxes and imposed a 5 percent levy on land and slaves. These changes came too late, however, to have any sustained impact on the Confederate war effort. Union War Financing In addition to its developed industrial base, the North entered the war with several apparent institutional advantages, including an established Treasury and tariff structure. With the exodus of southern representatives, the Republican-dominated Congress ratcheted up tariff rates throughout the war, beginning in 1862 with the Morill Tariff Act, which reversed the downward trend instituted by the Democrats between 1846 and 1857.

Subsequent tariff legislation, especially the 1864 act, raised rates further. Protective tariffs were politically popular among manufacturers, northern laborers, and even some commercial farmers. But Customs duties amounted to about $75 million annually, only nominally more, after adjusting for inflation, than the value of duties collected during the 1850s. Still, the high rate structure established in the Civil War would remain a hallmark of the post-war political economy of the Republican party. Ideological reservations tempered some of the Treasury’s supposed institutional advantages. Secretary of the Treasury Salmon Chase, like many northern policymakers, generally distrusted any form of exchange other than specie. They preferred to pay government debts by physically moving gold out of the Treasury instead of transferring funds from demand deposits via check. They also refused to utilize established private banks in New York, Boston, and Philadelphia as repositories for federal funds, further complicating financial transactions. Chase hoped to follow Albert Gallatin’s model of financing the War of 1812, which (initially) emphasized borrowing over taxation. Ultimately, however, mounting debts, a shortage of specie, and the threat of inflation led the Union to adopt innovative plans for both borrowing and internal taxation.

In contrast to the Confederacy, which relied on loans for about 35 percent of its war finances, the Union raised over 65 percent of its revenue this way. Having little personal experience, Chase turned to Philadelphia Banker Jay Cooke to administer the sale of war bonds. Although he expected banks and wealthy citizens to purchase most of them, Cooke employed a sophisticated propaganda campaign to market the bonds to the middling classes as well. Patriotic newspaper advertisements and an army of 2,500 agents persuaded almost one million northerners (about 25 percent of ordinary families) to invest in the war effort; bond sales topped $3 billion. In this way, Cooke previewed the techniques with which governments in the 20thcentury would fund modern wars. In order for the bond program to be successful, the North needed an unrestricted currency supply for citizens to pay for them and a source of income to guarantee the interest. The Legal Tender Act filled the first requirement. Passed in February 1862, the act authorized the issue of $150 million in Treasury notes, known as Greenbacks.

In contrast to Confederate paper, however, Congress required citizens, banks, and governments to accept Greenbacks as legal tender for public and private debts, except for interest on federal bonds and customs duties. This policy allowed buyers to purchase bonds with greenbacks while the interest accrued to them was paid in gold (funded, in part, by specie payments of customs duties). Investors enjoyed a bountiful windfall, since government securities purchased with depreciated currency were redeemed with gold valued at the prewar level. Taxpayers essentially made up the difference. Because most bonds were acquired by the wealthy or by financial institutions, the program concentrated investment capital in the hands of those likely to use it, much as Alexander Hamilton’s debt plan had sought to do. The Union government’s decision to implement a broad system of internal taxation not only insured a valuable source of income, but shielded the northern economy from the sort of ruinous inflation experienced by the South. Despite another $150 million Greenback issue, the overall northern inflation rate reached only 80 percent, comparable with the domestic rates during World Wars I and II.

The Internal Revenue Act of 1862, enacted by Congress in July, 1862, soaked up much of the inflationary pressure produced by Greenbacks. It did so because the Act placed excise taxes on just about everything, including sin and luxury items like liquor, tobacco, playing cards, carriages, yachts, billiard tables, and jewelry. It taxed patent medicines and newspaper advertisements. It imposed license taxes on practically every profession or service except the clergy. It instituted stamp taxes, value added taxes on manufactured goods and processed meats, inheritance taxes, taxes on the gross receipts of corporations, banks, and insurance companies, as well as taxes on dividends or interest they paid to investors. To administer these excise taxes, along with the tariff system, the Internal Revenue Act also created a Bureau of Internal Revenue, whose first commissioner, George Boutwell, described it as "the largest Government department ever organized." The majority of internal taxes and tariffs duties were regressive, consumption-oriented measures that affected lower income Americans more severely than higher-income Americans. In response, Republicans looked to reinforce the system’s fairness by implementing a supplementary system of taxation that more accurately reflected taxpayers’ "ability to pay." The income tax addressed this need.

The first federal income tax in American history actually preceded the Internal Revenue Act of 1862. Passed in August 1861, it had helped assure the financial community that the government would have a reliable source of income to pay the interest on war bonds. Initially, Salmon Chase and Thaddeus Stevens, Chairman of the House Ways and Means Committee, wanted to implement an emergency property tax similar to the one adopted during the War of 1812. This way, the government could adapt the administrative system that state and local governments had developed for their own property taxes. But legislators understood such a property tax as a direct tax. Article 1, Section 9 of the Constitution required the federal government to apportion the burden among states on the basis of population rather than property values. Emphasizing population over property value would actually render the tax quite regressive. Residents of lower-density western states, border states, and poor northeastern states stood to bear a greater burden than those of highly-populated urban states, despite the latter’s valued real estate. Their representatives also complained that a property tax would not touch substantial "intangible" property like stocks, bonds, mortgages, or cash.

As an alternative, policy makers sought to follow the example of British Liberals, who had turned to income taxation in order to finance the Crimean War without heavy property taxation. Justin Morrill, (R-VT), Chairman of the Ways and Means Subcommittee on Taxation and the architect of the regressive tariff structure, introduced a proposal for the first federal income tax. Because it did not tax property directly, congressional leaders viewed the income tax as indirect, and thus immune from constitutional strictures. The first income tax was moderately progressive and ungraduated, imposing a 3 percent tax on annual incomes over $800 that exempted most wage earners. These taxes were not even collected until 1862, making alternative financing schemes like the Legal Tender Act critical in the interim. The Internal Revenue Act of 1862 expanded the progressive nature of the earlier act while adding graduations: It exempted the first $600, imposed a 3 percent rate on incomes between $600 and $10,000, and a 5 percent rate on those over $10,000. The act exempted businesses worth less than $600 from value added and receipts taxes.

Taxes were withheld from the salaries of government employees as well as from dividends paid to corporations (the same method of collection later employed during World War II). In addition, the "sin" excise taxes imposed in the 1862 act were designed to fall most heavily on products purchased by the affluent. Thaddeus Stevens lauded the progressivity of the tax system: "While the rich and the thrifty will be obliged to contribute largely from the abundance of their means . . . no burdens have been imposed on the industrious laborer and mechanic . . . The food of the poor is untaxed; and no one will be affected by the provisions of this bill whose living depends solely on his manual labor." But the war grew increasingly costly (topping $2 million per day in its latter stages) and difficult to finance. The government’s ability to borrow fluctuated with battlefield fortunes. The Confederate navy harassed northern shipping, reducing customs receipts. And inevitable administrative problems reduced the expected receipts from income and excise tax collection. In response, Congress approved two new laws in 1864 that increased tax rates and expanded the progressivity of income taxation.

The first bill passed in June upped inheritance, excise, license, and gross receipts business taxes, along with stamp duties and ad valorem manufacturing taxes. The same act proceeded to assess incomes between $600 and $5,000 at 5 percent, those between $5,000 and $10,000 at 7.5 percent, and established a maximum rate of 10 percent. Despite protest by certain legislators regarding the unfairness of graduated rates, the 1864 act affirmed this method of taxing income according to "ability to pay." An emergency income tax bill passed in July imposed an additional tax of 5 percent on all incomes in excess of $600, on top of the rates set by previous income tax bills. Congress had discovered that the income tax, in addition to its rhetorical value, also provided a flexible and lucrative source of revenue. Receipts increased from over $20 million in 1864 (when collections were made under the 1862 income tax) to almost $61 million in 1865 (when collections were made under the 1864 act and emergency supplement).

The affluent upper middle classes of the nation’s commercial and industrial centers complied widely with the income tax. 10 percent of all Union households had paid some form of income tax by war’s end; residents of the northeast comprised 15 percent of that total. In fact, the northeast, a sector of American society that owned 70 percent of the nation’s wealth in 1860, provided the most critical tax base, remitting 75 percent of the revenues. In total, the North raised 21 percent of its war revenue through taxation, as opposed to the South, which raised just 5 percent this way. Federal taxes were also instrumental in instituting a system of national banking during the war. The National Banking Acts of 1863 and 1864 imposed a system of "free banking" — banks established by general incorporation as opposed to specific charters — on a national level. State banks were granted national charters and allowed to issue national bank notes (these notes were separate from Greenbacks). One third of a national bank’s capital had to consist of federal bonds, since the new national notes were to be backed by federal bonds. The National Banking Acts thus served as another means to induce bankers to purchase bonds.

In an attempt to avoid increased regulation, however, many state banks declined to seek national charters. To remedy this problem, the 1864 act imposed a 10 percent tax on state bank notes to drive them out of existence. As a result of this tax, the number of national banks tripled by the war’s end, while their purchase of U.S. bonds nearly quadrupled.

Question: The first income tax in the US, 3% of all incomes over US $800, was levied to pay for what war?
Answer: Civil War