In 1860, the US Treasury paid between 8 and 12 percent interest on government bonds in order to raise additional funds and meet public expenditures.
He sent letters to cabinet members including Edward Bates, Salmon Chase, and Gideon Welles inquiring whether the president had constitutional authority to collect duties ranging from an import tariff to a property tax.
Documents housed at the Library of Congress indicate that Lincoln was concerned with the Federal government's ability to collect tariffs from ports along the Southeastern seaboard, noting the imminent threat of secession.
[6] On July 4, 1861, President Lincoln opened a special session of Congress with the explicit purpose of addressing the Civil War from a legislative standpoint.
One of the primary concerns facing Congress was the question of funding: given a surfeit of volunteers, the Union Army military incurred extraordinary expenditures as they trained and armed a martial force.
Despite its sweeping reform, the ineffective enforcement mechanism coupled with a 3% flat tax rate failed to yield the desired revenue.