American History and Genealogy Project

Civil War

Valentines and Civil War Tax Law

July 1, 1862 (12 Stat. 432)

Joseph Forrest of the Eighth Illinois Volunteer Infantry Comapany A. His sweetheart was Elizabeth Ehrhart. The Eighth Illinois saw much action during the war. It was involved in battles at Shiloh and Corinth (1862), and Vicksburg (1863). After three years of active duty, Joseph was mustered out and honorably discharged in early December 1863. A few days later, he reenlisted in the same outfit while it was in camp at Vicksburg, Mississippi. The Forrests' first child was born in 1864 while Joseph was recovering in a New Orleans hospital from wounds suffered at a battle near Jackson, Mississippi. The Forrests' daughter, Adah, died shortly after birth. Joseph was thereafter honorably discharged due to his affected health in 1865. Joseph refused to apply for a pension for moral reasons as pensions were supplied by a whiskey tax. He died at 35 years of age. See a valentine Joseph sent to his sweetheart from the war front here.

The Civil War income tax was the first tax paid on individual incomes by residents of the United States. It was a "progressive" tax in that it initially levied a tax of 3 percent on annual incomes over $600 but less than $10,000 and a tax of 5 percent on any income over $10,000. In 1864 the rates increased and the ceiling dropped so that incomes between $600 and $5,000 were taxed at 5 percent, with a 10 percent rate on the excess over $5,000. Passed as an emergency measure to finance the Union cause in the Civil War, the first income tax generated approximately $55 million in government revenues during the war.

Taxes were levied on residents of all states and territories not in rebellion. In the South, some states operated under reconstruction governments while the war went on. Virginia, for example, the site of the Confederate capital, was largely controlled by federal forces, and northern and western Virginians were subject to the income tax from the beginning. States that seceded were included in the tax base as soon as Union troops established control. Georgians paid income taxes in 1865 even though their state was not officially readmitted to the Union until 1870.

Justin Morrill, Representative from Vermont, gained approval for a sharply increased tariff measure on March 2, 1861, two days before Abraham Lincoln was inaugurated. Little opposition had been raised against the proposal, given that seven Southern states had seceded. The South had vainly, and probably accurately, argued that they paid a major portion of the tariff burden, but the revenue generated from the duties was spent overwhelmingly in the North.1

The Civil War taxes were not immediately repealed at the end of the war but continued in force until 1872, when the Grant administration sponsored the repeal of most of the "emergency" taxes. The tax on whiskey remained in force. Between 1868 and 1881 the U.S. Supreme Court responded to challenges regarding the validity of the Civil War taxes on dividends, real estate, inheritances, and income tax by upholding the constitutionality of those taxes. Archives.gov - Civil War Tax Laws

The tax records from 34 states and territories are currently available on microfilm. Most of the publications reproduce the records for the period 1862 to 1866. The Internal Revenue assessment lists, 1862-1874, for the following states and territories are currently available as microfilm publications: 

    * M754, Alabama, 1865-1866, 6 rolls;

    * M755, Arkansas, 1865-1866, 2 rolls;

    * M756, California, 1862-1866, 3 rolls;

    * M757, Colorado, 1862-1866, 3 rolls;

    * M758, Connecticut, 1862-1866, 23 rolls;

    * M759, Delaware, 1862-1866, 8 rolls;

    * M760, District of Columbia, 1862-1866, 8 rolls;

    * M761, Florida, 1865-1866, 1 roll;

    * M762, Georgia, 1865-1866, 8 rolls;

    * M763, Idaho, 1865-1866, 1 roll;

    * M764, Illinois, 1862-1866, 63 rolls;

    * M765, Indiana, 1862-1866, 42 rolls;

    * M766, Iowa, 1862-1866, 16 rolls;

    * M767, Kansas, 1862-1866, 3 rolls;

    * M768, Kentucky, 1862-1866, 24 rolls;

    * M769, Louisiana, 1863-1866, 10 rolls;

    * M770, Maine, 1862-1866, 15 rolls;

    * M771, Maryland, 1862-1866, 21 rolls;

    * M773, Michigan, 1862-1866, 15 rolls;

    * M775, Mississippi, 1865-1866, 3 rolls;

    * M776, Missouri, 1862-66, 22 rolls;

    * M777, Montana, 1864-1872, 1 roll;

    * M779, Nevada, 1863-1866, 2 rolls;

    * M780, New Hampshire, 1862-1866, 10 rolls;

    * M603, New Jersey, 1862-1866, rolls 1-17 (with New York);

    * M782, New Mexico, 1862-1870, 1 roll;

    * M603, New York, 1862- 1866, rolls 18-218 (with New Jersey);

    * M784, North Carolina, 1864-1866, 2 rolls;

    * M787, Pennsylvania, 1864-1866, 107 rolls;

    * M788, Rhode Island, 1862-1866, 10 rolls;

    * M789, South Carolina, 1864-1866, 2 rolls;

    * M791, Texas, 1865- 1866, 2 rolls;

    * M792, Vermont, 1862-1866, 7 rolls;

    * M793, Virginia, 1862-1866, 6 rolls;

    * M795, West Virginia, 1862- 1866, 4 rolls.

Table 3

Civil War Revenue Timeline


November 1860
Abraham Lincoln elected president
December 20, 1860
South Carolina secedes, six states follow between January and February 1, 1861
April 12, 1861
Fort Sumpter fired on, Civil War begins
August 5, 1961
First Civil War tax increase enacted, which quickly proves to be inadequate
February 1862
Legal Tender Act authorized the issue of breenbacks
April 24, 1862
George Boutwell confirmed by President Lincoln for the position of Commissioner of Internal Revenue
July 1, 1862
Revenue act passed, creating the first federal income tax & other taxes
July 17, 1862
George Boutwell becomes the first Commissioner of Internal Revenue; he serves less than one year (to March 1863)
August 8, 1862
Bids opened to produce the revenue stamps and Butler & Carpenter awarded the contract
September 27, 1862
First revenue stamps issued
October 1, 1862
New stamp taxes begin
November 18, 1862
First private die issued � L. R. Herrick
December 25, 1862
Taxpayers no longer have to match stamp titles to documents
January 1, 1863
Bureau of Internal Revenue has almost 4,000 employees, including 365 collectors and assessors
February 25, 1863
National Banking Act created national banks chartered by the federal government; by 1865 11,500 banks joined the national banking system
March 18, 1863
Joseph Lewis appointed the Second Commissioner of Internal Revenue after the resignation of Boutwell on March 3
Fiscal year 1863
Revenues more than double for the year, but deficit is $600 million and national debt tops $1 billion for the first time in U.S. history
August 1, 1864
Significant tax changes occur under the Revenue Act amendments, including increasing income tax rates and several changes in stamp taxes
April 9, 1865
Lee surrenders at Appomattox, effectively ending the Civil War
Fiscal year 1865
Annual expenditures over $1 billion; national debt almost $2.7 billion
1866
Annual revenues exceed half a billion dollars; Internal Revenue collect over $300 million, almost $70 million from income tax; revenue stamp taxes begin to be reduced or eliminated; federal government Treasury collects over half a billion dollars in revenue and achieves a surplus; surpluses will continue for the next 27 year
March 1868
A Congressional Committee investigated revenue frauds
July 20, 1868
Commissioner given authority to hire 25 detectives to prevent fraud in the collection of taxes (the job title was changed to agent in 1872)
October, 1868
Death of John Butler, firm continues as Joseph Carpenter Co.
March 12, 1869
George Boutwell becomes Secretary of the Treasury
October 1, 1872
The income tax and all documentary stamp taxes (except bank check) eliminated; the number of internal revenue districts reduced to 80
December 24, 1872
The offices of assessor and assistant assessor abolished and duties transferred to collectors
1873
A major panic led to depression, a recurring problem for the rest of the century.Populists would advocate income taxes as a symbol of reform and to regulate the economy
1875
The "Whiskey Ring" broken up, of conspiracy of distillers and internal revenue officials. 238 people indicted (110 convicted), $3 million in taxes recovered
1875
Carpenter looses the revenue stamp contract to National Bank Note Co.
1878
American Bank Note Co. obtains the federal revenue stamp contract
1881
Bureau of Engraving and Printing receives the federal revenue stamp contract
July 1, 1883
Internal revenue taxes repealed, including bank check and proprietaries
1884
E. B. Sterling buys the B&C archive from Carpenter

Source

1 Wartime Tariff Legislation, http://www.u-s-history.com/pages/h975.html

2Tax History Museum, 1861 -1865: The Civil War, http://www.taxanalysts.com/museum/1861-1865.htm

3Cool Things, Civil War Valentines, Kansas Historical Society, http://www.kshs.org/cool/coolval.htm

4Income Tax Records of the Civil War Years, By Cynthia G. Fox, Winter 1986, Vol 18, No. 4, http://www.archives.gov/publications/prologue/1986/winter/civil-war-tax-records.htm

Finanacing the Civil War: The Office Of Internal Revenue and the Use of Revenue Stamps, http://acct.tamu.edu/giroux/financingcivil.html

Avalon Project: Confederate States of America - Mississippi Secession - http://avalon.law.yale.edu/19th_century/csa_missec.asp


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