TODAY IN HISTORY 05 AUGUST, 1861, Abraham Lincoln signs Revenue Act that imposed 3% tax on annual income above $800

On this day in 1861, the 16th American President, Abraham Lincoln imposes the first federal income tax 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.

President Lincoln, had early in March, 1861 begun stock taking for the American government’s ability to wage war against the South. In a letter sent to cabinet members, Edward Bates, Gideon Welles and Salmon Chase, Lincoln requested their opinions as to whether or not the president had the constitutional authority to “collect such duties”. 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’s language which broadly written to define income as gain “derived 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.” According to the U.S. Treasury Department, the comparable minimum taxable income in 2003, after adjustments for inflation, would have been approximately $16,000.

The Lincoln's tax law was repealed by the Congress in 1871 and passed the 16th Amendment in 1909, which set in place the federal income-tax system used today in America. The 16th Amendment was ratified in 1913 by the Congress.