Revenue Act of 1862

What Is the Revenue Act of 1862?

The Revenue Act of 1862 was an expansion of the first U.S. income tax laid out under the previous Revenue Act of 1861. It was passed to raise extra federal revenue to fund the war against the Confederate States of America during the American Civil War. It is striking for introducing the first progressive income tax in the U.S. furthermore, for laying out a separate federal tax bureaucracy that would eventually turn into the modern Internal Revenue Service (IRS).

Understanding the Revenue Act of 1862

As the American Civil War hauled into a second year in 1862, the U.S. federal government recognized a need to raise more revenue for extra soldiers, weapons, and other wartime expenditures. The Revenue Act of 1861, spent the previous year, had proactively presented the first direct federal income tax to assist with funding the war. After a series of hesitant fights through 1861 and the first half of 1862, it had become certain that the war would last longer — and cost more — than President Lincoln had initially trusted.

The American Civil War started in 1861 with the severance of numerous southern states, alluded to as the Confederate States of America. There had been economic issues in the years leading up to the war and the federal government was at that point needing funding. After its first endeavor to fund the war, economic conditions demolished in the North. The Revenue Act of 1861 had required the first-ever income tax on American residents. The act taxed imports, accommodated a direct land tax, and forced a tax of 3% on individual incomes more than $800.

Against this foundation, Congress passed the Revenue Act of 1862 to grow federal tax revenue to support the war exertion. The act supplanted the 3% tax on incomes above $800 under the 1861 act (which had not even been collected yet) with a progressive tax of 3% on incomes somewhere in the range of $600 and $10,000 and a 5% tax on incomes more than $10,000.

The new act additionally had strong taxes on liquor and tobacco products. The income tax rates of the Revenue Act of 1862 were subsequently increased with the Revenue Act of 1864. More income tax sections and higher tax rates were added in 1864. The income tax was subsequently revoked in 1872 and once again introduced in 1913 with the sanction of the 16th Amendment.

The 1862 act likewise decisively expanded the scope of goods subject to federal excise taxes, which had previously been restricted to generally luxury and "sin" things. The new act currently demanded federal excises on everything from performers to medicines and a great many goods and in the middle between, including manufactured goods; raw materials like iron, plumes, and calfskin; and licenses for a wide range of callings. After the war, excise taxes were cut back to apply essentially to liquor and tobacco sales.

The act made the Office of the Commissioner of Internal Revenue to control and authorize the new federal taxes. The 1861 act had given the president the authority to delegate one assessor and one collector for each state, yet the U.S. government any other way come up short on centralized federal bureaucracy to collect and regulate the new taxes. The federal government surrendered it to the states to implement the tax at their circumspection.

To normalize and authorize compliance with the new taxes, the Commissioner of Internal Revenue was engaged to distribute regulations, forms, and guidelines for the tax and to carry out different actions to put the act into effect. The Bureau of Internal Revenue is referred to now as the Internal Revenue Service (IRS). The name was changed to stress a greater spotlight on serving the public as opposed to just collecting taxes.

Features

• This act is prominent for its sensational expansion of goods and services subject to federal excise, the presentation of the first progressive income tax, and the foundation of a centralized federal tax bureaucracy.
• The Revenue Act of 1862 was a U.S. federal law to fund the war against the Southern States.
• The Revenue Act of 1862 overhauled and expanded the previous Revenue Act of 1861 to raise extra revenue as it had become obvious that the war would last longer and cost more than initially trusted.