No attempt was made to secure any adequate revenue from taxes during the first months of the Civil War. It was the policy of the Secretary of the Treasury to rely principally upon borrowed funds to meet the emergency needs. In spite of this policy of Secretary Chase, Congress, in 1862, determined to extend the use of taxes, and an adoption of a system of internal revenue duties was a part of the plan. The problem of getting a workable system was, of course, much more complex than when excises had previously been used during the War of 1812. The territory as well as the population was greatly extended, while industry had become greatly diversified during this lapse of forty-five years.

To inaugurate a successful system of excises under these conditions, an extensive administrative machinery was necessary, and this, of course, did not exist. With the hope that little attempt would be made to evade the tax, it was decided to place low duties upon a large number of articles. The list of taxed articles included liquors, tobacco, manufactured products, carriages, billiard tables, slaughtered animals, means of transportation, and various forms of business organizations. Taxes were also levied upon incomes and legacies. Besides these a large number of licenses were imposed.

Tax of 1864. - The returns from these levies were disappointing - less than one half of the anticipated revenue was realized - and Congress attempted to remedy the situation by new legislation in 1864. In general outlines, this measure was much the same as the earlier enactment, the principal difference being a general increase in rates and an extension to more commodities. So all-inclusive was the system that it became impossible to tell how many taxes many commodities were expected to pay. Nearly every class of raw material bore a tax, as well as the finished product, while a tax generally was placed upon transportation and sale. While the burdens inflicted were often inequitable, yet from the fiscal standpoint the returns proved satisfactory. That the administrative machinery had had a chance to be developed since the passage of the earlier law, will account in part for the more successful operation of the law of 1864.

Development Since the Civil War. - A change can be noted in the temper of the citizenship following the Civil War from that which was evidenced after the War of 1812. Less clamor was raised to have the excise taxes removed. The old selfishness of the states was beginning to disappear, and they were beginning to view the extension of Federal activities as a lessening of the burden on the treasuries of the states. The expenses of the government continued to be high for a number of years after the close of the war, and never did go back to the pre-war level. It needed little argument, then, to show that the excise tax should remain as a fundamental part of the fiscal system.

Changes were gradually made until the tax applied principally to tobacco and distilled and malted liquors. The rates on these have varied somewhat, but usually have been lower than in most countries. During the Spanish-American War the excise taxes were greatly extended, and the existing duties were practically doubled, so that their receipts formed a considerable portion of the total revenue. At the end of the war their use was again curtailed to practically the former basis, where it remained until the Great War. The extensive use made of these taxes during and after the Great War is familiar to all. Because of the large future revenue needs to meet interest and debt charges, as well as the rapidly multiplying government activities, and because of the elimination of liquors as a source of revenue, it is to be expected that the excise tax will be continued on a very much larger number of commodities than during the pre-war period.