On this day in 1861, the federal government enacted the nation’s first income tax.* Congress did so intending not to raise much revenue from the tax itself so much as to reassure skeptics that the government would have sufficient revenue on hand to pay interest on the war bonds that the Union was floating at the time. The law also was somewhat progressive. Only incomes of $800/annually or more were subject to taxation, exempting the majority of Northern wage earners.
Unfortunately, the lingering impact of Jacksonian fiscal policy — even Republicans at the time typically believed the federal government should maintain a healthy distance from the banking sector — coupled with bad news from the front lines threatened the Northern economy. With General McClellan stuck in the mud outside Washington in the fall of 1861, investors lost faith in Union victory and the region’s financial markets. By early winter, a run on the banks had begun, leaving the Treasury Department unable to pay its bills. Congress, despite widespread fears of soft money, eventually responded to the crisis by printing greenbacks. And if you’ve been reading this blog diligently, you know where that measure led: to the Rothschilds, the Illuminati, and Lincoln’s assassination.
This blog post brought to you by Americans for Tax Reform.
* Not to be mistaken for the much better known Internal Revenue Act, which became law nearly a year later, on July 1, 1862. By “much better known” I mean much better known to nerds like me. Which is to say, if you knew about it already, you’re probably still pretty cool. Or at least cooler than me.