Taxes During The Civil War
At the time of taxes during the Civil War, the Revenue Act of 1861 was passed by the Congress. This resulted in previous excise taxes being reinstated and also forced a personal income tax. Incomes over $800.00 per year were to be taxed at 3 percent.
As most existing Federal taxes were derived from customs duties and excise taxes, taxing personal income took the Federal system down a new path.
Congress quickly realized there were some issues with the income tax and ultimately did not collect any of these new taxes until a year later.
With the war clearly dragging on, Federal debt was growing by about $2 million dollars a day and by spring of 1862 it was equally clear the Federal government was going to require supplementary revenues.
To deliver these new revenues, Congress passed a whole new set of excise taxes on July 1, 1862 on things like yachts, pool tables, pianos, telegrams, feathers, leather, iron, playing cards, gunpowder, feathers, telegrams, iron, leather, drugs, whiskey and patent medicines.
They also created and collected new license fees for many trades and professions and taxed many legal documents.
There were central reforms made in the 1862 law that kind of prognosticated the main themes of many of the taxes in place today.
For instance, they put in place a multi-tiered tax rate structure that taxed incomes up to $10,000 at 3 percent -- but made the tax rate 5 percent for incomes of $10,000 and higher.
They enacted a standard deduction of $600 and also allowed numerous deductions for rental housing, repairs, losses, and other taxes paid.
Also, to make sure people paid their taxes on time, taxes were withheld by employers.
When the Civil War ended, much of the tax revenues were no longer needed so most taxes were rescinded. By 1868, liquor and tobacco taxes were the Government’s primary source of revenue.
In 1872, they even did away with the personal income tax. For the next 45 years after 1868, the remaining excise taxes made up almost 90 percent of all Federal revenue.
Source: U.S. Department of TreasuryReturn from Taxes During The Civil War to History-Of-Income Tax Main PageReturn from Taxes During The Civil War to Easy-TAX-Information Home Page
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Because Americans were fearful of a Federal Government that could be far too strong, in 1781 the Articles of Confederation were implemented, which gave a lot of political power to each of the indivdual States in the Union...
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When the Civil War ended, much of the tax revenues were no longer needed so most taxes were rescinded. By 1868, liquor and tobacco taxes were the Government’s primary source of revenue. In 1872, they even did away with the personal income tax...