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Money, Taxes, Banking & Finance During the Civil War
Transcript of Money, Taxes, Banking & Finance During the Civil War
Max & Roy
The war dominated national finance
Early on the Confederacy relied mostly on tariffs on imports and taxes on exports.
Confederate war finance
The realities of the prolonged war, the necessity of paying interest on existing debt, and the drop in revenues from other sources, eventually forced both the central Confederate government and the individual states to agree to an imposition of a "War Tax" by the middle of 1861.
In the summer of 1861, Salmon P. Chase reported to the Congress that he would need $320 million over the next fiscal year to finance the war. He thought he could put his hands on $300 million by borrowing part of it and raising the rest through existing taxes and sale of public lands.
In 1862, Abraham Lincoln signed a bill that imposed a 3% tax on incomes between $600 and $10,000 and a 5% tax on higher incomes.
First income taxes
National Bank Act
One of the first attempts of the nation to issue a national currency came in the early days of the Civil War when Congress approved the issue of $150 million in national notes known as greenbacks. The Legal Tender Act of 1862 was passed. This act mandated that paper money be issued and accepted in lieu of gold and silver coins. The bills were backed only by the national government's promise to redeem them and their value was dependent on public confidence in the government as well as the ability of the government to give out specie in exchange for the bills in the future.
The South financed a much lower proportion of its expenditures through direct taxes than the North.A major part of the reason for why tax revenue did not play as large a role for the Confederacy as it did for the Union was the individual states' opposition to a strong central government and the belief in states' rights which precluded giving too much taxing power to the government in Richmond.
$5 & $20
During the civil war, each state in North and South had the different money.
Greenback is the nickname of U.S. dollar. U.S. dollar was printed on only one side with green ink, so the bills were soon known as "greenbacks".
There also had income taxes in the South. It authorized its first national income tax measure in 1863. The Confederate bill that finally passed after great debate was a graduated income tax. It exempted wages up to $1,000, levied a 1% tax on the first $1,500 over the exemption, and 2% on all additional income.