Editing Abraham Lincoln (section)

====Fiscal and monetary policy====
{{Main|Economic history of the United States Civil War}}

[[File:US-$1-LT-1862-Fr-16c.jpg|thumb|alt=Both sides of a one-dollar bill|One dollar "Greenback"]]
After the Battle of Fort Sumter, Lincoln and Secretary of the Treasury Salmon Chase faced the challenge of funding a wartime economy. Congress quickly approved Lincoln's request to assemble a 500,000-man army, but it initially resisted raising taxes.{{sfn|Weisman|2002|pp=27–28}} After the Union defeat at the First Battle of Bull Run, Congress passed the [[Revenue Act of 1861]], which imposed the first [[Income tax in the United States|U.S. federal income tax]]. The act created a flat tax of three percent on incomes above $800 (${{formatnum:{{Inflation|US|800|1861|r=-2}}}} in current dollars). This taxation reflected the increasing amount of wealth held in stocks and bonds rather than property, which the federal government had taxed in the past.{{sfn|Weisman|2002|pp=30–35}} As the average urban worker made approximately $600 per year, the income tax burden fell primarily on the rich.{{sfn|Paludan|1994|pp=111–112}} Lincoln also signed the second and third [[Morrill Tariff]]s, the first having become law in the final months of Buchanan's tenure. These tariffs raised import duties considerably and were designed both to raise revenue and to protect domestic manufacturing against foreign competition. During the war, the tariff also helped manufacturers offset the burden of new taxes.{{sfn|Paludan|1994|pp=113–114}} Throughout the war, Congress debated whether to raise additional revenue primarily by increasing tariff rates, which most strongly affected rural areas in the West, or by increasing income taxes, which most strongly affected wealthier individuals in the Northeast.{{sfn|Weisman|2002|p=85}}
The revenue measures of 1861 proved inadequate for funding the war, forcing Congress to pass further bills to generate revenue.{{sfn|Weisman|2002|pp=37–38}}

In February 1862, Congress passed the [[Legal Tender Act]], which authorized the minting of $150 million of "[[Greenback (1860s money)|greenbacks]]"—the first [[banknote]]s issued by the U.S. government since the end of the [[American Revolution]]. Greenbacks were not backed by [[gold]] or [[silver]], but rather by the government's promise to honor their value. By the end of the war, $450 million worth of greenbacks were in circulation.{{sfn|Paludan|1994|pp=109–110}} Congress also passed the Revenue Act of 1862, which established an [[excise tax]] affecting nearly every commodity,{{sfn|Paludan|1994|p=111}} as well as the first national [[Estate tax in the United States|inheritance tax]].<ref name="pollack1"/> The Revenue Act of 1862 also added a [[progressive tax]] structure to the federal income tax.{{sfn|Weisman|2002|pp=40–42}} To collect these taxes, Congress created the Office of the [[Commissioner of Internal Revenue]].<ref name="pollack1">{{cite journal|last1=Pollack|first1=Sheldon D.|title=The first national income tax, 1861–1872|journal=Tax Lawyer|date=2014|volume=67|issue=2|url=https://udel.edu/~pollack/Downloaded%20SDP%20articles,%20etc/academic%20articles/The%20First%20National%20Income%20Tax%2012-18-2013.pdf}}</ref> 

Despite these new measures, funding the war continued to be a challenge.{{sfn|Weisman|2002|pp=81–82}} The government continued to issue greenbacks and borrow large amounts of money, and the U.S. national debt grew from $65 million in 1860 to $2 billion in 1866.{{sfn|Paludan|1994|pp=109–110}} The [[Revenue Act of 1864]] represented a compromise between those who favored a more progressive tax structure and those who favored a flat tax.{{sfn|Weisman|2002|pp=84–88}} It established a five-percent tax on incomes greater than $600, a ten-percent tax on incomes above $10,000, and it raised taxes on businesses.<ref name="pollack1" /> In early 1865, Congress levied a tax of ten percent on incomes above $5000.{{sfn|Weisman|2002|pp=90–91}} By the end of the war, the [[income tax]] constituted about one-fifth of the federal government's revenue,<ref name="pollack1" /> though it was intended as a [[State of emergency|temporary wartime measure]].{{sfn|Brownlee|2004|pp=34&ndash;37}}
Lincoln also took action against rampant fraud during the war, enacting the [[False Claims Act of 1863]]. This imposed civil and criminal penalties for false claims and made it possible for private citizens to file false claims ([[qui tam]]) lawsuits on behalf of the U.S. government.<ref>{{Cite journal|last=Hamer|first= Sean|year=1996|title=Lincoln's law: constitutional and policy issues posed by the qui tam provisions of the false claims act|journal=Kansas Journal of Law & Public Policy|volume=6|issue=2|pages= 89&ndash;106}}</ref><ref>{{Cite web |title=The False Claims Act: a primer |url=https://www.justice.gov/sites/default/files/civil/legacy/2011/04/22/C-FRAUDS_FCA_Primer.pdf |accessdate=March 13, 2025 |publisher=U.S. Department of Justice}}</ref> Hoping to stabilize the currency, Chase convinced Congress to pass the [[National Banking Act]] in February 1863, as well as a second banking act in 1864. Those acts established the [[Office of the Comptroller of the Currency]] to oversee "national banks" subject to federal, rather than state, regulation. In return for investing a third of their capital in federal bonds, these national banks were authorized to issue federal banknotes.{{sfn|Weisman|2002|pp=81–82}} After Congress imposed a tax on private banknotes in March 1865, federal banknotes became the dominant form of paper currency.{{sfn|Paludan|1994|pp=111–112}}