One of the most challenging issues Congress faced during the Civil War was how to fund the war effort. Before the war tariffs generated adequate revenue for a relatively small federal budget. When it became clear that the war would not be decided quickly, Congress drafted legislation to generate more revenue. The chairman of the Senate Finance Committee, William Pitt Fessenden of Maine, became the architect of many of the nation’s wartime revenue policies.

Fessenden’s first attempt to fund the war, the Revenue Act of 1861, fell far short of its goals. Hastily created during a special session, the bill taxed imports, provided for a direct land tax, and imposed a tax of 3% on individual incomes over $800. It did not provide for an enforcement mechanism. Consequently, the law generated little additional revenue. A second revenue bill, signed into law in 1862, proved to be more effective.