Title: Financing the Civil War - Essential Civil War Curriculum
Headings: Financing the Civil War
Financing the Civil War
by Michael A. Martorelli

Content: Printed on green paper, those “greenbacks” would be convertible into an equal amount of government bonds and considered legal tender for all public and private debts. [ 6] After two months of heated deliberation, Congress approved his plan. The new currency became quite acceptable as fiat money by merchants and consumers alike. Indeed, in July 1862, Congress authorized another $150 million greenback issue, and urged that about 25% of the notes be issued in denominations of one to five dollars. With the war’s costs steadily mounting, and the government’s ability to sell bonds still somewhat constrained, Congress approved the sale of an additional $150 million worth of greenbacks in early 1863. By the end of the war, approximately $450 million worth of this new national currency was circulating throughout the Union. [ 7]
Raising Taxes
The federal government and the states had long imposed a variety of taxes, e.g. poll taxes, excise taxes, property taxes, business taxes, and import duties. As noted above, however, the unusually large amounts of revenue that would be needed to finance the war effort required government officials to consider additional taxes even as they began to seek other sources of funds. Treasury Secretary Chase first persuaded Congress to establish an income tax in August 1861; but that law did not require anyone to pay such taxes before mid-1862.