On August 5, 1861, President Lincoln imposes the 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鈥檚 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 鈥渃ollect [such] duties.鈥 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鈥檚 language was broadly written to define income as gain 鈥渄erived 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.鈥 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Congress repealed Lincoln鈥檚 tax law in 1871, but in 1909 passed the 16th Amendment, which set in place the federal income-tax system used today.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.
