Revenue Act of 1861

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 statute (see Sec. 49). The Act, motivated by the need to fund the Civil War,^[1] 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 or elsewhere, or from any other source whatever".^[2]

The tax imposed was a flat tax, with a rate of 3% on incomes above $800 ($27,129 in 2023).^[3] The Revenue Act of 1861 was signed into law by Abraham Lincoln.

The income tax provision (Sections 49, 50 and 51) was repealed by the Revenue Act of 1862. (See Sec.89, which replaced the flat rate with a progressive scale of 3% on annual incomes beyond $600 (which was 3.4 times the 1862 nominal gross domestic product per capita of $177.69; the corresponding income in 2021 is $234K) and 5% on incomes above $10,000 (which is 56 times the 1862 nominal gross domestic product per capita; corresponding to $3.9M of income in 2021) 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").