The Revenue Act of 1861 established the first national income tax in the United States to fund the Civil War. It also levied various tariffs on imports and instituted a tax on real estate to address the federal government's financial crisis.
Abraham Lincoln signed the Revenue Act of 1861 into law on the 5th of August 1861 after Congress passed the legislation. The act followed a special session of Congress opened by Lincoln on the 4th of July 1861 to address the war from a legislative standpoint.
The Revenue Act of 1861 levied a three percent flat rate income tax on individuals with an annual income at or exceeding eight hundred dollars. Only three percent of the population had an annual income of at least eight hundred dollars when the tax took effect in 1861.
Senator William Pitt Fessenden of Maine chaired the Senate Finance Committee and led the drafting of the Revenue Act of 1861. Thaddeus Stevens, chairman of the House Committee of Ways and Means, also played a key role in declaring the bill necessary to sustain the government.
The Revenue Act of 1861 failed to yield desired revenue figures because it lacked a comprehensive enforcement mechanism and relied heavily on local cooperation. The absence of strong central oversight meant many states struggled to implement collection efforts efficiently during the national emergency.