Revenue Act of 1861
The Revenue Act of 1861 , fully entitled An Act to Provide Increased Revenues from Imports, to Pay Interest on the Public Debt, and for Other Purposes , was the first federal law in the United States to create an income tax . The law went into effect on August 5, 1861 with the signature of President Abraham Lincoln .
The tax rate provided a fixed 3% charge on all annual income over $ 800 . Taking inflation into account, that would be a limit of $ 18,875 in 2009. The tax rate increased to 5% for all persons who had their permanent residence abroad. One year after the law came into force, the Revenue Act of 1862 introduced a tax progression .