Revenue Act of 1861

Revenue Act of 1861

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The Revenue Act of 1861, formally cited as Act of August 5, 1861, Chap. XLV, 12 Stat. 292, included the first U.S. Federal income tax
Income tax
An income tax is a tax levied on the income of individuals or businesses . Various income tax systems exist, with varying degrees of tax incidence. Income taxation can be progressive, proportional, or regressive. When the tax is levied on the income of companies, it is often called a corporate...

 statute (see Sec.49). The Act, motivated by the need to fund the Civil War
American Civil War
The American Civil War was a civil war fought in the United States of America. In response to the election of Abraham Lincoln as President of the United States, 11 southern slave states declared their secession from the United States and formed the Confederate States of America ; the other 25..., imposed an income tax to be "levied, collected, and paid, upon the annual income of every person residing in the United States, whether such income is derived from any kind of property, or from any profession, trade, employment, or vocation carried on in the United States
United States
The United States of America is a federal constitutional republic comprising fifty states and a federal district...

 or elsewhere, or from any other source whatever [ . . . .]”

Rates under the Act were 3% on income above $800 (adjusted for inflation: $18,875 in dollars and 5% on income of individuals living outside the country.

The Revenue Act of 1861 was signed into law by Abraham Lincoln, the first Republican President. This Act introduced Federal income tax as a flat rate tax.

The income tax provision (Sections 49, 50 and 51) was repealed by the Revenue Act of 1862
Revenue Act of 1862
The Revenue Act of 1862 , was passed by the United States Congress to help fund the American Civil War. The Act was signed into law by President Abraham Lincoln, introducing the first progressive rate income tax to the country....

. (See Sec.89, which replaced the flat rate with a progressive scale
Progressive tax
A progressive tax is a tax by which the tax rate increases as the taxable base amount increases. "Progressive" describes a distribution effect on income or expenditure, referring to the way the rate progresses from low to high, where the average tax rate is less than the marginal tax rate...

of 3% on annual incomes beyond $600 ($12,742 in 2009 dollars) and 5% on incomes above $10,000 ($212,369 in 2009 dollars) or those living outside the U.S., and perhaps more significantly it was explicitly temporary, specifying termination of income tax in "the year eighteen hundred and sixty-six").