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McGovern">George S. McGovern</a> </span> <span class="post-date"><i>Date:</i> <span class="capitals"> <a href="https://web.archive.org/web/20111015145816/http://www.commandposts.com/2011/08/">August</a> <a href="https://web.archive.org/web/20111015145816/http://www.commandposts.com/2011/08/05/">5</a> , <a href="https://web.archive.org/web/20111015145816/http://www.commandposts.com/2011/">2011</a> </span> </span> </h4> </div>  </div>  <div class="post-content"> <div class="stripe"> <div class="stripe-inner"></div> </div> <div class="post-inner"> <p>A series of financial measures had been enacted to fund the war, which was costing $2 million daily. Under the direction of the Treasury Department, and with the administrative guidance of thePhiladelphiabanker Jay Cooke, the government had issued war bonds (which, over the course of the war, would raise about $3 billion for theUnion, or 65 percent of its revenue). Needing an unrestricted currency supply to fuel the bond program, Congress passed the Legal Tender Act in 1862, which authorized the production and distribution of paper money, known popularly as greenbacks.</p> <p>More significantly, the Internal Revenue Act of 1861, the first federal income tax in American history, assured the financial community that the government would have a reliable source of income to pay the interest on war bonds. Subsequent Revenue Acts of 1862 and 1864 created moderately progressive tax brackets and set rates at 5, 7.5, and 10 percent. By the end of the war nearly one in ten American house holds (mostly in the affluent states in the industrial Northeast, the section of the country that held most of the wealth) paid an income tax.</p> <p><span id="more-7951"></span></p> <p>Also enacted was an excise tax system that imposed taxes on almost everything: liquor, professional licenses, carriages, yachts, medicines, corporations, stamps, and the like. The Morrill Tariff Acts of 1860 and 1861 doubled the amounts of taxes collected on dutiable items brought into the United States, while at the same time protecting the steel, iron, mineral, beef, and fishing industries, among many others. Congress also enacted the National Banking Acts of 1863 and 1864, which established a system of national charters for banks and encouraged the implementation of a national currency. They also mandated that one- third of a new bank’s notes had to be backed by federal bonds, thus assisting the war effort. When state banks balked at the new regulation, a provision of the 1864 Act imposed a 10 percent tax on state bank notes; state banks then had to choose to comply or go out of business. Overall, the tax system quickly grew so large that the Bureau of Internal Revenue was created to administer it.</p> <p><em><a href="https://web.archive.org/web/20111015145816/http://www.commandposts.com/2011/08/income-tax-to-pay-war-bond-interest/9780805083453-2/" rel="attachment wp-att-8039"><img class="alignleft size-medium wp-image-8039" title="Abraham Lincoln by George McGovern." src="https://web.archive.org/web/20111015145816im_/http://www.commandposts.com/wp-content/uploads/2011/08/9780805083453-201x300.jpg" alt="Abraham Lincoln by George McGovern." width="121" height="180"/></a>Excerpted from </em>Abraham Lincoln<em> by George McGovern. </em></p> <p>Copyright © 2009 by the author and reprinted by permission of Times Books, an imprint of Henry Holt and Company, LLC.</p> <p>All rights reserved. This work is protected under copyright laws and reproduction is strictly prohibited. Permission to reproduce the material in any manner or medium must be secured from the Publisher.</p> <p>Read the content of the Internal Revenue Act of 1861 <a href="https://web.archive.org/web/20111015145816/http://memory.loc.gov/cgi-bin/ampage?collId=llsl&fileName=012/llsl012.db&recNum=323">via the Library of Congress</a>.</p>  <div class="buy-buttons"> <div class="amazon"><a href="">Amazon</a></div> <div class="barnes-noble"><a href="">Barnes & Noble</a></div> <div class="indie-bound"><a href="">Indie Bound</a></div> </div> <img class="post-end" src="https://web.archive.org/web/20111015145816im_/http://www.commandposts.com/wp-content/images/post-end.jpg" alt="Symbol"/> </div>  </div>  <div class="post-footer"> <div class="post-inner"> <div class="post-footerwrap"> <div class="post-footerleft"> <p><img src="https://web.archive.org/web/20111015145816im_/http://www.commandposts.com/wp-content/images/comments_icon.png" alt="Comments"/> <span class="capitals"><a class="comment-link" href="#comments">No Comments </a></span></p> <div class="social-media"> <div class="twitter"><a href="https://web.archive.org/web/20111015145816/http://twitter.com/share" class="twitter-share-button" data-count="horizontal" data-via="CommandPosts" data-url="https://web.archive.org/web/20111015145816/http://www.commandposts.com/2011/08/income-tax-to-pay-war-bond-interest/" data-text="Just read Income Tax To Pay War Bond Interest by George S. 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McGovern</h1><div class="author-photo"><img src="https://web.archive.org/web/20111015145816im_/http://www.commandposts.com/wp-content/images/author-avatar-default.jpg" alt="George S. McGovern" class="photo"/></div><div class="author-bio"><strong>George S. McGovern</strong> is the author of <em>Abraham Lincoln</em>. He represented South Dakota in the United States Senate from 1963 to 1981 and was the Democratic nominee for president in 1972. He was a decorated bomber pilot in World War II, after which he earned his Ph.D. in American history and government at Northwestern University. A recipient of the Presidential Medal of Freedom, he lives in Mitchell, South Dakota.</div></div> <p class="more-by-authors">Read other articles by <a href="https://web.archive.org/web/20111015145816/http://www.commandposts.com/author/george-s-mcgovern/" title="Posts by George S. McGovern">George S. 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