1861
Lincoln Imposes First Federal Income Tax
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Congress repealed Lincoln’s tax law in 1871,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.