FINANCES OF THE CONFEDERATE STATES OF AMERICA:

LOANS, TREASURY NOTES, AND TAXES

David Phillips

Phillips 2

Introduction

The purpose of this paper is to discover the ways the Confederate States of America financed themselves in the American Civil War from a historian, accounting, and finance perspective. This is meant to be written as an informational as well as an argumentative paper, using source documents compiled in The War of the Rebellion: A Compilation of the Official Records of the Union and Confederate by Brig. Gen. Fred C. Ainsworth and Joseph W. Kirkley; as well as the following works: Financial Failure and Confederate Defeat by Douglas B. Ball; Confederate Finance by Richard Cecil Todd; The Confederate States of America 1861-1865 by John Christopher Schwab. Many of these authors use each other as sources for their work, as well as the War of the Rebellion as their sources. This paper is meant to discover how Confederate fiscal policies and legislation changed by the rates of inflation that were funded by the Confederate government.

Some key terms that need to be defined, Finance: Money or other liquid resources of a government, business, group, or individual, the science or study of the management of funds, the obtaining of funds or capital.1 Treasury Notes: A note issued by the treasury for use as currency.2 Coupon Bonds: A bond on which interest is paid by coupons.3 Inflation: a continuing rise in the general price level usually attributed to an increase in the volume of money and credit relative to available goods and services.4 Knowing these terms will help understand the paper and the way the confederacy financed itself.

CREATION

1 Merriam Webster Online2 Merriam Webster Online3 Merriam Webster Online4 Merriam Webster Online

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The Provisional Congress of the Confederate States of America Treasury Department came

about in the Provisional Congress of the Confederate States of America. The states of South

Carolina, Florida, Georgia, Alabama, Louisiana, and Mississippi met in Montgomery, Alabama

on February 4, 1861. They passed the Provisional Constitution of the Confederate States of

America on February 8, 1861, which created the Treasury Department, which with the President

of the Confederacy, Jefferson Davis, was responsible for financing and accounting for the

finances of the Confederacy.5

LOANS

Loans are a major part of the Confederate financing strategy, and as the war became longer,

contrary to the beginning school of thought that the Southern independence would be over

quickly, loans became the primary tool of the Confederate Congress, as will be shown

throughout the legislation passed throughout the course of the war.

The beginning of what would seem to become many different loan legislation throughout the

following years began on February 8, 1861 with the Confederate States accepting a $500,000

loan from the General Assembly of Alabama. As with most entities it is not uncommon for new

entities to begin their life with loans. The interesting part of this loan legislation would be the

flattering of the State of Alabama for its patriotism, “this Congress place the highest appreciation

upon this generous, patriotic, and considerate action of the State of Alabama, and realize in it the

zealous devotion of the people of that State to the cause of Southern independence.”6 This

became a common tactic that is used throughout the Confederacy in order to raise funds, troops,

and create a sense of national identity throughout the course of the war. The sum given by the

State of Alabama to the Confederate Congress was in part to pay for the expenses of the

5 Ainsworth and Kirkley, War of the Rebellion, Series I-Vol. I, 93-996 Ainsworth and Kirkley, War of the Rebellion, Series IV-Vol. I, 100.

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assembly as it met. This loan is different from other loan legislation as the general assembly of

the State of Alabama offered to the Provisional Confederate Congress, rather than the

Confederate Congress passing legislation to take loans from the States or other entities in order

to finance the Confederacy. Other states also offered and donated funds to the Confederacy, as

J.C. Schwab points out “In the case of Louisiana over half a million was offered, which

represented the amount of United States funds seized by the State government in New Orleans.”7

The next major piece of legislation in regards to loans would be what became known as $15

Million Dollar Loan or the Bankers’ Loan passed on February 28, 1861 by the Confederate

Congress.8 This act was to “raise money for the support of the Government and to provide for

the Defense of the Confederate States of America.”9 It authorized the President of the

Confederacy to borrow up to $15,000,000 on credit for the CSA, to summarize that, it allowed

the President to take up to a $15,000,000 loan in order to support the Confederate Government.

This became just one of the policies that the Confederacy used to finance themselves, and it

would continue throughout the coming months through more legislation.

The 15-million dollar loan had several provisions for the Treasury Department to raise finances,

the first being the authorization of treasury bonds or stocks. The bonds issued are ten year bonds

at 8% per year, payable in semi-annual interest, at no less than a $50 issuing price. These could

be redeemed after five years with three month public notice, from the first of day of September at

that time. The equation for the bonds would be the Bond Pricing Formula which uses the

ordinary annuity formula, the whole formula is: ((Bond Price = C *(([1-[1/(1+i)^-n]]/i) +

M/(1+i)^n) where PV equals the present value of the bond (In this case would be $50), PMT

7 Schwab, The CSA, 6.8 Ainsworth and Kirkley, War of the Rebllion, Series IV-Vol. I, 116.9 Ainsworth and Kirkley, War of the Rebellion, Series IV Vol I, 116.

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equals the coupon payment, i equals the interest rate (.08/2 = .04), and n equals the number of

periods (2*10 = 20 periods) The interest payment can be calculated by taking the issue price

($50) and multiplying it by the semi-annual interest rate (4%) which can be found to be $2.00 per

interest coupon. The future value of these bonds is found to be $109.56, but as these are coupon

bonds, the accumulated interest is paid out on the semi-annual basis with the coupons. The

present value of the bonds is found to be $27.18, this is based on the $2.00 coupon that is to be

paid. (See Appendix A) These are all in nominal numbers, in real numbers at May of 1861

(closest date of information found) the bond purchase amount would be $55. This is found by

taking the issue price and multiplying it by the average value of one dollar in gold ($1.10) to the

Confederate Treasury notes.10 (Appendix B) This is assuming the issue price was fifty dollars,

and not more, as the legislation provided. This shows that the cost of inflation was prevalent

throughout the course of the war, and increased by the end of 1861. J.C. Schwab demonstrates

this in his work, “The bonds of the 15-million loan were quoted at par, in currency, till the

middle of 1862; then they rose to 200, and ranged between 125 and 200 till January 1865. In

specie, the quotations were between 80 and 90 till the second quarter of 1862; then they fell to 33

by the winter of 1862-3, and to 20, 17, 10, 7, and 6 during successive quarters.”11 This loan

legislation passed before any conflict broke out between the Union and Confederacy.

Following the 15-million dollar loan, Confederate Congress passed the Produce Loan or 50-

Million Dollar Loan in the Act of May 16, 1861, the war now underway, both the North and

South needed to raise funds to the train and raise troops. This legislation allowed for the issuing

of $50,000,000 in bonds payable at the expiration of twenty years from the date of issuance, and

earning a rate of 8% annually, to be paid semi-annually. These bonds were different than the

10 Todd, Confederate Finance, 198.11 Schwab, The CSA, 7.

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previous legislation, because it allowed them to be “sold for specie, military stores, or for the

proceeds of sales of raw produce or manufactured articles, to be paid in the form of specie or

with foreign bills of exchange.”12 Because of this, it became known as the Produce Loan. This

even made provision for the Secretary of Treasury to be paid in foreign bills in exchange for

bonds issued under this legislation. The allowing of foreign currency or other stores to be used

for the purchase suggests that the inflation rate was already beginning to increase. It suggests that

this was a method to help back the Confederate bonds by using tangible goods, or with foreign

currency. Richard Cecil Todd shows “but whereas the 15-Million Dollar Loan had been directed

at the bankers and commercial interest, the 50-Million Dollar Loan being in part a produce loan,

was brought more specifically to the attention of planters and farmers,”13

This legislation also made provisions for the creation of Treasury notes, to the total amount

not exceeding $20,000,000. These notes were to be “without interest, and in denominations

of not less than $5; the said notes to be receivable in payment of all debts or taxes due to the

Confederate States except the export duty on cotton, or in exchange for the bonds herein

authorized to be issued.”14 The Treasury notes were to be payable at the end of two years

from their date of issuance, in form of specie. The Treasury note holders could at any time

within the two years convert them into Confederate States bonds. The bonds available upon

conversion would be ten year bonds, earning 8% annual interest, paid semi-annually. This

demonstrates that the Confederacy while trying to make treasury notes a form of currency,

also were trying to make the Bonds a form of investment and worth more than the Treasury

notes.

12 Ainsworth and Kirkley, War of the Rebellion, Series IV-Vol. I, 328. 13 Todd, Confederate Finance, 32.14 Ainsworth and Kirkley, War of the Rebellion, Series IV-Vol. I, 328.

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The legislation provided for more notes to be issued within the next ten years, as well as

stock that would not exceed $20,000,000, and extending punishment from a previous

legislation (March 9, 1861) to those found counterfeiting Treasury notes. This was an

important piece of the legislation, as the punishments for counterfeiting Treasury notes and

Bonds became more severe by early 1865. This suggests that there is a problem with how the

Treasury Notes are being printed. This will be discussed under the section on Treasury Notes.

The next major piece of legislation passed is the extension of the Produce loan, which

increased it from fifty-million to one hundred-million. This legislation passed and signed into

law on August 19, 1861. The only major difference between the fifty-million dollar loan and

the one-hundred- million dollar loan was that it provided for a war tax. The war tax levied

$.50 on every $100 of real property, this will be discussed in greater detail in the section on

taxes. On December 24, 1861, new legislation was passed which extended the produce loan

even further, the only difference between this legislation and the two previous ones, was that

the bonds issued earned 6% annual interest payable semi-annually. By December of 1861,

inflation in the Confederacy was already beginning to show, as becomes apparent with a

decrease in the interest rates on bonds. These legislations extended the produce loan in part

to the blockade that the Union had imposed upon the Confederacy under the Anaconda plan,

which began during the summer of 1861. It helped create further patriotism in the

Confederacy by allowing planters and farmers to invest in the Confederacy using their goods.

It would allow them to do their part without actually joining the military, and using their

social status as a means to stay in a form of gentry.

April 18, 1862 brought the final piece of legislation to the Produce loan. It increased the total

amounts of the Treasury notes, bonds, and stocks to a total of $250,000,000, thus making it

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known as the $250-Million loan. It continued the 6% annual interest bonds, showing that the

inflation rates causing issues in the market. 1516 The extensions in the Produce Loan were

caused by the little response from planters and farmers and trying to sell cotton and produce

to the Confederacy at prices above the market prices, trying to make the biggest profit out of

the war. Other causes for the extensions were the inability of the Confederate government to

control the cotton crop, and the failure to export and break out of the blockade implemented

by the Union.17 Because of the failures of the Produce loan to increase the amount of

produce, cotton, and currency to fund the military and government, the Treasury Department

turned to other loan methods to finance the government.

The next major piece of loan legislation came a little under a year later. It was passed on

February 20, 1863. This legislation closed the 8% bond subscriptions, and would new ones

were being issued. These bonds and stock would earn 7% interest annually, paid semi

annually, and funded treasury notes. This was a major piece of legislation because it tied into

the next piece which was passed on March 23, 1863, which funded treasury notes.18 The

decrease in interest rates can reasonably assumed to be in regards to an increase in inflation,

with an increase in inflation, the interest rates decrease as do the prices of bonds. As bond

holders receive a fixed rate of return on the bond interest, when the market value of currency

decreases, so does the prices of bonds. With the decrease in the market due to inflation, the

bond interest would have to be lowered in order to pay out a fixed rate of return.

The legislation passed on March 23, 1863, provided that Treasury notes that were not bearing

interest, that were issued previously to December 1, 1862 would be able to be converted into

15 Schwab, The CSA, 167.16 Todd, Confederate Finance, 198.17 Ball, Financial Failure and Confederate Defeat, 86.18 Ainsworth and Kirkley, War of the Rebellion, Series IV-Vol. II, 450-452.

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8% bonds until April 22, 1863. From April 22, 1863 to August 1, 1863, they could be

converted into 7% bonds. If the treasury notes issued were not converted by August 1, 1863,

they would be able to be converted into only thirty year, 4% annual interest, payable semi-

annual bonds. All call certificates for 8% bonds, were to be redeemed by July 1, 1863, if not

called by then they would only be redeemable in 7% annual interest, payable semi-annually,

with a term of thirty years.19 The purpose of this act was to reduce currency in the market and

use it towards funding the government. This act was a failure as it failed to reduce the amount

of currency, even though it sold more bonds than any of the legislation passed from July 1,

1861 through October 13, 1862.20

On April 30, 1863, the Confederate Congress extended the legislation passed on May 16,

1861.21 It increased the amount of coupon bonds, by extending the legislation. These were

extended to twenty year bonds, with the interest payments payable in coin or in bales of

cotton. The cotton was due to the failure of the confederate government to sell the cotton on

the market, and get through the blockade.

The Funding Act passed on February 17, 1864. This act asked for and received the assistance

of banks and treasuries of several states. It asked that depositors close their accounts by April

1, 1864, or their deposits would be leveled to 1/3 of the deposit, or it would be awarded to

them in a 4% bonds. 22 This was declared to be a forced funding act, and it required the banks

cooperation with the Confederate government. This act was an attempt to reduce the amount

of currency in the market, and thus drive down inflation rates, as well as funding the

government to continue the course of the war. With a decrease in currency in the market it

19 Ainsworth and Kirkley, War of the Rebellion, Series IV-Vol II, 450-453.20 Ball, Financial Failure and Confederate Defeat, 183-183.21 Ainsworth and Kirkley, War of the Rebellion, Series IV-Vol. II, 529.22 Ainsworth and Kirkley, War of the Rebellion, Series IV-Vol. III, 159-161.

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would drive down inflation rates, and thus bringing the value of the currency back up to

better rates with gold values. This can be shown to have worked for a short time period based

on the average values of gold to confederate currency. 23 (Appendix B)

The loans of June 13, 14, 1864 continued the Funding Act of February 17, 1864. They

allowed for the issuance of more twenty year, 4% annual interest, and payable semi-annually

coupon bonds.

The final piece of loan legislation passed on March 17, 1865. This legislation superseded the

legislation passed on March 13, 1865. This act was “an Act to raise coin for the purpose of

furnishing necessary supplies for the Army.”24 This legislation provided for the borrowing of

$3,000,000 in hard currency from banks. If the currency was not able to be acquired

immediately, it allowed a 25% tax to be levied on “gold and silver coin, gold dust and

bullion, and foreign exchange in the Confederate States”25 which was to be collected on April

1, 1865. This act only achieved raising $300,000 which came from the Bank of Richmond.

Less than a month later, the Confederate Government collapsed.

The Confederate Government resorted to passing a total of fourteen loan legislations, more

than any other form of financing legislation, with it being the most successful in raising

funds, but only equaling just over twenty percent of its finance. It was the most successful

because it was a manageable debt, whereas treasury notes created new paper currency and

therefore driving up inflation rates.26 Starting with a loan from the State of Alabama, up to the

end with the Act to raise coin for necessary supplies for the army, there was a wide array of

the legislation that was passed in regards to loans. With the beginning and its hopeful

23 Schwab, The CSA, 167.24 Ainsworth and Kirkley, War of the Rebellion, Series IV-Vol. III, 115525 Ainsworth and Kirkley, War of the Rebellion, Series IV-Vol. III, 1155-1156.26 Thornton and Ekelund, Tariffs, Blockades, Inflation, 75.

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optimistic outlook of bonds and playing upon the patriotism of the states and citizens of the

Confederacy, with bonds expiring in the short term, and moving to the beginning of 1862 and

seeing the realism set in that the war would not be over quickly and trying to plan for the

future with twenty year and longer bonds. The ending with trying to force banks to give up

hard currency in order to continue to fight a war that was quickly coming to a close. You can

see the transformation in the loans from the short term bonds coming due within 90 days, and

moving into those that had clauses stating they were payable in twenty years or upon notice

after peace was signed with the United States, as well as the taxes used to fund the interest

payments, starting with duties on cotton of 1/8th of cent, to the end with a 25% direct tax upon

gold and other metal valuables. (The loans are summarized with their total amounts, and total

loan indebtedness in Appendix B.)

TREASURY NOTES

A Treasury note is an immediate government obligation that has a set time period, a fixed

interest rate, and pays interest semi-annually.

Treasury notes issued throughout the Confederate States government very closely relates to

the Loan legislation, primarily because Treasury notes were included in the Bond and stock

legislations, this included the Produce loan, and Funding act, as well as others. Because of

the specie legislation that was passed, the Confederate Government by the end of the war had

to lower interest rates, and raise taxes in order to reduce specie in the market and reduce

inflation. The Confederate Government hoped to use bonds and the primary means of

accomplishing this, but even confederate government agents preferred to use Treasury notes

because they were easier to trade for items because of their dependable interest payments.

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The first legislation to include Treasury notes was passed on March 9, 1861.27 With this being

passed, Secretary Christopher G. Memminger contracted a private business to supply the

Treasury notes. This was the National Bank Note Company of New York, they were

contracted to print the Treasury notes with the belief that they would be recognized as a

foreign entity, and therefore have no problems with the printing of the notes. The first

Treasury notes issued totaled an amount of $1,000,000 bearing interest of 3.65%. Treasury

notes gain lower interest as they are a short term in comparison with bonds. With the

outbreak of war, the printing plates were seized by the Union Government, while they were

being attempted to be smuggled back to the Confederacy. (Appendix D.) This lead to the

printing of Treasury notes being contracted out to Mr. S. Schmidt of New Orleans, Louisiana.

He was contracted to print the remainder of the notes that were not fulfilled by the National

Bank Note Company.

With the passing of the loan legislation on May 16, 1861, authorizing stocks, bonds, and

Treasury notes. The Treasury notes were funded by the stocks purchased. “in lieu of bonds,

to an amount not exceeding $20,000,000, the Secretary of the Treasury, with the assent of the

President, may issue Treasury notes to the same amount, without interest, and in

denominations of not less than $5; the said notes to be receivable in payment of all debts or

taxes due to the Confederate States except the export duty on cotton, or in exchange for the

bonds herein authorized to be issued.”28. The Treasury notes were to be payable two years

from its issue date for specie, or at any time be converted into ten year bonds earning 8%

interest, payable semi-annually.29 Issues arose with the printing of these notes, these included

Mr. Schmidt never producing a note, and choosing to print bank notes for New Orleans banks

27 Ainsworth and Kirkley, The War of the Rebellion, Series IV-Vol. I, 328-329.28 Ainsworth and Kirkley, War of the Rebellion, Series IV-Vol. I, 328.29 Ainsworth and Kirkley, War of the Rebellion, Series IV-Vol. I, 328-330

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first,30 the lack of printing manufacturing within the confederacy, failures in security

violations which would later result in counterfeiting,31 and as a result of these issues the

Confederate government found other avenues, which included J. Manouvrier of New Orleans,

and Hoyer & Ludwig of Richmond. (Appendix E.) With some of the work being

counterfeited the legislation of May 16, 1861 provided for punishment of those caught

counterfeiting.

The next legislation passed with Treasury notes would be under the one hundred-million

dollar loan legislation on August 19, 1861. It moved from the $20,000,000 passed on May 16,

1861, and authorized the printing of $100,000,000 Treasury notes. These Treasury notes were

non-interest bearing, and were receivable “in payment of the war tax hereinafter provided,

and of all other public dues except the export duty on cotton, and shall also be received in

payment of the subscriptions of the net proceeds of sales of raw produce and manufactured

articles.”32 These Treasury notes were funded by twenty year bonds, earning 8%. These notes

were to be “payable to bearer at the expiration of six months after the ratification of a treaty

of peace between the Confederate States and the United States.”33 They could also be

redeemed at any time for Confederate State bonds. The significance of these notes were that

they were non interest bearing, which means that they are sold at a discount and mature at the

face value. For example, a fifty dollar treasury note would be purchased at twenty-five dollars

and mature for fifty dollars at the end of the time period that is listed on the note. The other

significance of this legislation is the ability to purchase bonds, increasing long term debt of

30 Ball, Financial Failure and Confederate Defeat, 115.31 Ball, Financial Failure and Confederate Defeat, 116.32 Ainsworth and Kirkley, War of the Rebellion, Series IV-Vol.I, 568-574.33 Ainsworth and Kirkley, War of the Rebellion, Series IV-Vol.I, 568.

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the confederacy, showing the loan indebtedness as the most successful source of financing for

the Confederacy.

As these notes were under the Produce loan legislation the amounts of the Treasury notes

were increased under the December 24, 1861 legislation. This increased the amount of non

interest bearing notes to $150,000,000, and $30,000,000 twenty year, 6% call certificates.34

The call certificates were issued to help counter balance the inflation on the notes, a problem

that plagued the Confederate economy from early on which can be seen by the separation of

currency to gold values.35 (Appendix B)

The next piece of legislation for Treasury notes passed on April 17, 1862. This legislation

created new Treasury notes up to $165,000,000. These notes were payable six months after

peace with the United States. Unlike the other Treasury notes, these earned $.02 per day per

$100. Of these the denomination was not to be less than $100. It also provided for

$5,000,000 of Treasury notes to be in the denominations of $1, and $2. 36

While the April 17, 1862 legislation was being passed another Treasury note legislation was

in the Confederate Congress, it was introduced on April 12, 1862, but not passed until April

18, 1862. It allowed for $215,000,000 total of stocks, bonds, and Treasury notes to be

issued. Of this $50,000,000 was to be Treasury notes, and $10,000,000 of that was to be held

in reserve to be paid out for called deposits.37 This piece shows that there was market

uncertainty within the Confederacy, and the Government was taking steps to prepare

themselves in the case of a bank run. This would then imply that the inflation rates were high,

and this would be due in part to the taxation legislation that had been passed. A bank run

34 Ainsworth and Kirkley, War of the Rebellion, Series IV-Vol.I, 812-813.35 Schwab, The CSA, 167.36 Ainsworth and Kirkley, War of the Rebellion, Series IV-Vol.I, 1071.37 Ainsworth and Kirkley, War of the Rebellion, Series IV-Vol.I, 1057-1058.

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would be of concern to the Confederacy as the inflation rates had continued to climb, even

with currency reduction legislation being introduced. It would be a concern because

merchants already at this time had become wary of confederate currency and in some cases

were demanding hard currency, and with this it could cause an undermining of the paper

currency in circulation.

As was previously mentioned in the loan legislation, On March 23, 1863, all non-interest

bearing Treasury notes that were issued previous to December 1, 1862, would be fundable by

8% bonds, until April 22, 1863. After April 22, 1863, the Treasury notes were fundable by

7% bonds or stocks until August 1, 1863. After August 1, 1863, the non-interest bearing notes

were no longer fundable to the holder. All Treasury notes issued after December 1, 1862,

were fundable by 7% stock or bonds, within ten days of this act, until August 1, 1864. After

August 1, 1864 the Treasury notes were fundable by 4%, thirty year bonds, which would be

payable upon six months of a treaty with the United States. 38

The final legislation of Treasury notes was passed on February 17, 1864. It allowed “the

holders of all Treasury notes above the denomination of five dollars, not bearing interest,

shall be allowed until the first day of April, 1864, east of the Mississippi River, and until

the 1st day of July, 1864, west of the Mississippi River, to fund the same, and until the

periods and at the places stated the holders of all such Treasury notes shall be allowed to

fund the same in registered bonds payable twenty years after their date, bearing interest at

the rate of four per cent. per annum, payable on the 1st day of January and July of each

year.” 39 This meaning that the treasury notes were able to turn in the notes for twenty

year treasury notes, earning 4% interest, and payable semi-annually.

38 Ainsworth and Kirkley, War of the Rebellion, Series IV-Vol. II, 450-453.39 Ainsworth and Kirkley, War of the Rebellion, Series IV-Vol. III, 159- 161.

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Treasury notes were the most used financing option that the Confederacy used.

Government obligations are typically considered a safer investment, because they are

supposed to be more stable. The Treasury notes, just like the stocks and bonds, were sold

playing on the notion of patriotism, Southern independence, and the Southern sense of

honor and pride. Examples of this can be seen on the designs of the Treasury notes

(Appendixes D & E), with George Washington, Justice, Liberty, and Eagle. “Because

inflation is such an easy means of finance, it encouraged the Confederate administration

to extract and waste large volumes of resources.”40

TAXATION

The last major part of the Confederate financing was its taxation. As taxation is a major part

of most government financing and operating, it is important to consider this as a portion of

the Confederate financing. The taxation legislation was also mixed with the loan legislation,

and the Treasury note legislation.

The first taxation legislation passed was on August 19, 1861. This created a war tax, the tax

was levied upon property including “Real estate of all kinds; slaves; merchandise; bank

stocks; railroad and other corporation stocks; money at interest or invested by individuals in

the purchase of bills, notes and other securities for money, except the bonds of the

Confederate States of America, and cash on hand or on deposit in bank or elsewhere; cattle,

horses, and mules; gold watches, gold and silver plate, pianos, and pleasure carriages”41 these

were all to be taxed at the assessed value of $.50 per $100 in value; unless the taxable

property that was mentioned for the head of household was under $500 in value. It created a 40 Thornton and Ekelund, Tariffs, Blockades, and Inflation, 75.41 Ainsworth and Kirkley, War of the Rebellion, Series IV-Vol. I, 567-574.

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tax system, including assessors, collectors, and tax districts. It also allowed for fines of non-

payment and fines for collectors who did not submit the taxes collected.42

The next major piece of taxation legislation was passed on April 24, 1863. This was called an

act to lay taxes for the common defense and carry on the Government of the Confederate

States. This tax was “levied and collected upon the value of all naval stores, salt, wines and

spirituous liquors, tobacco, manufactured or unmanufactured, cotton, wool, flour, sugar,

molasses, sirup, rice, and other agricultural products”, “on all moneys, bank notes or other

currency on hand, or on deposit” “the value of all credits on which the interest has not been

paid, held or owned by any person, co partnership or corporation”43(Ainsworth) The tax

levied against the liquors, tobacco, cotton, wool, flour, sugar, molasses, syrup, rice and other

products was at 8% , for the others listed it was taxed at 1%. It also created form of income

tax upon certain industries, such as bankers, auctioneers, wholesale dealers of liquor and

spirits, retail and wholesale dealers, pawnbrokers, distillers, brewers, and hotels, and

innkeepers, brokers, tobacconists, theaters, recreation halls, livestock merchants, butchers,

peddlers, apothecaries, photographers, lawyers, physicians, and confectioners. This also

created a tax upon salaried employees, unless they were military or navel service, which

amounted to 1% of the gross salary.

The act of April 24, 1863 was amended on February 17, 1864. This amendment was designed

to have those working register with the tax collector of their district. It provided for penalties

for not registering, and provisions for exceptions to the act passed on April 24, 1863. It also

increased the span of businesses to be taxed, and the amounts in different industries or

services.

42 Ainsworth and Kirkley, War of the Rebellion, Series IV-Vol. I, 567-564.43 Ainsworth and Kirkley, War of the Rebellion, Series IV-Vol. II, 514-524.

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The amendments of February 17, 1864, were increased with the act passed on June 14, 1864.

These amendments decreased the amount of tax on real property from 8% to 5%. Gold,

Silverware and plates, jewelry, jewels, watches were to be taxed at 10%. It exempted

schools, churches, and other charitable institutions from the taxation.44

The final acts of taxation were passed on March 11, and 17, 1865. The final piece of taxation

legislation was passed on March 17, 1865. It increased the amount of tax on “the amount of

all gold and silver coin, gold dust and bullion, and foreign exchange in the Confederate

States, payable in kind.”45 It increased the amount of tax levied on those valuables to 25%, on

those that are greater than $200 in value. This tax was also levied on top of all other taxes on

the same valuables.

Overall the Confederacy was able to raise about twelve percent of its expenditures through

taxes, making it the least successful of the three major choices of financing the confederacy.

46”Unable to impose taxes to finance the war, the Davis administration followed the timeworn

practice of currency depreciation.”47 This can also be demonstrated by comparing appendixes

C, D, and G, in the total amounts. Appendix C showing the total funded debt and

indebtedness through loan legislation, Appendix D showing the amount of Treasury notes

issued to fund the confederacy, and Appendix G showing the of funds raised through

taxation.

The final legislation on all of the major parts of the financing of the Confederacy shows the

desperation to stay afloat, amid a losing war, and a poor economy. Their financing acts show

hopeful optimism from the beginning and a realistic sense of ending to the war. With the

44 Ainsworth and Kirkley, War of the Rebellion, Series IV-Vol. III, 140.45 Ainsworth and Kirkley, War of the Rebellion, Series IV-Vol. III, 1155.46 Hughes and Cain, American Economic History, 267.47 Thornton and Ekelund, Tariffs, Blockades, and Inflation, 33.

Phillips 19

information presented it becomes easier to see how and why the confederacy chose to use

funded debt (loans) in order to finance itself, with it being the most successful, as well as

showing the lesson of not to place all of the finance upon a single source, in the case of the

confederacy, cotton., and that causing high levels of inflation can lead to the downfall of a

government.

Phillips 20

Appendix A.

Phillips 21

Appendix B

1861 1862 1863 1864 1865 January - $1.25 $3 $20 to 20.50 $45 to 60

February - 1.25 4.00 22.50 to 25 45 to 65 March - 1.30 5.00 23 to 24.50 70 to 60

April - 1.40 5.50 22 to 23 60.00 May 1.10 1.50 5.50 18 to 21

June 1.10 1.50 $7 to 8 17 to 19 July 1.10 1.50 9.00 20 to 23

August 1.10 1.50 12 to 13 22.5 to 25 September 1.10 2.50 12 to 13 22.5 to 27.5

October 1.15 2.50 14.00 26 to 27 November 1.15 3.00 15 to 17 27.5 to 33.50

Average Value of $1 Gold Compared With Confederate Treasury Notes During Each Month of The War From May 1861 to April 1, 1865 (Todd pp 198)

1861 1862 1863 1864 1865January 1.2 3 21 53February 1 1.2 3.3 23 58March 1 1.3 4.1 22 61April 1 1.5 4.5 21May 1 1.5 5.2 19June 1 1.5 7 17July 1.1 1.5 9 20August 1.1 1.5 12 22September 1.1 2 12 23October 1.1 2 13 26November 1.2 2.9 15 30

Average Monthly Value In Currency of One Gold Dollar (Schwab pp 167)

Phillips 22

Appendix C (Todd Pg 82-84)

TABLE OF THE FUNDED DEBT OF THE CONFEDERATE STATES OF AMERICAAlabama Loan of February 8, 1861 $ 500,000

Loan of February 28, 1861 Coupon Bonds $ 10,882,750 Exchanged for Stock $ (245,900) $ 10,636,850 Stock $ 6,674,200 Certificates Erroneously issued $ (3,650)

Transfer Certificates $ (2,317,400) $ (2,321,050) $ 4,353,150

Loan of May 16, 1861 Coupon Bonds $ 958,500 Stock $ 12,235,600 Less Transfers $ (3,870,400)

$ 8,365,200 Less Certificates Redeemed $ (237,100) $ 8,128,100

Loan of August 19, 1861 Coupon Bonds $ 74,880,050 Less Bonds Redeemed $ (457,350) $ 74,422,700 Stock Issued $ 35,389,450 Less amount of transfers $ (10,241,550) $ 25,147,900

Loan of December 24, 1861 6% Call Certificates issued $ 69,006,870 Less Certificates Redeemed $ (12,516,400) $ 56,490,470

Loan of April 12, 1862 Coupon Bonds $ 2,818,100 Stock Issued $ 448,550 Less Transfers $ (44,100) $ 404,450

Ealanger Loan January 29, 1863 $ 15,000,000

Loan of February 20, 1863 8% Coupon Bonds $ 81,668,100

Phillips 23

8% Stock Issued $ 21,372,100 Less Transfers $ (6,459,300) $ 14,912,800 7% Coupon Bonds $ 54,183,100 7% Stock Issued $ 16,788,000 Less Amount Transferred $ (4,029,900) $ 12,758,100

Loan of March 23, 1863 Coupon Bonds 6% Issued $ 16,740,300 4% Issued $ 22,300 $ 16,762,600 6% Stock Issued $ 5,023,800 Less Transfers $ (745,700) $ 4,278,100

Loan of April 30, 1863Coupon Bonds $ 8,372,000

Loan of February 17, 1864 20 year 4% Registered Bonds $ 10,198,800 Less Transfers $ (14,900) $ 10,183,900 30 Year 6% Coupon Bonds $ 145,755,000 4% Call Certificates $ 65,500,000 20 Year 6% Bonds $ 6,000,000 6% Non-Taxable Certificates $ 38,045,000 4% Coupon Bonds $ 16,263,500 Stock $ 32,040,000

Loan of June 13, 1864 Coupon Bonds $ 2,164,000

Loan of June 14, 1864 $ 4,000,000 Loan of March 13, 1865Loan of March 17, 1865 (Superseding March 13, 1865) Richmond Bank Loan $ 300,000

Total Indebtedness $ 712,046,420

Phillips 24

Appendix D (Todd pg 119-120)

AMOUNT OF EACH ISSUE OF CONFEDERACY TREASURY NOTES

Act of March 9, 1861 $ 2,021,100.00

Act of May 16, 1861 $ 17,347,955.00

Act of August 19, 1861 Total $ 292,101,830.00

Less: Notes Destroyed, Stolen, etc. $ (140,000.00) $ 291,961,830.00

Act of April 17, 1862Total $ 128,561,400.00 Less: 100's Destroyed $ (320,000.00) $ 128,241,400.00

Act of October 13, 1862Total $ 140,403,200.00

Less: Ones & Twos never issued $ (2,400.00) $ 140,400,800.00

Act of March 23, 1863Total $ 517,995,278.50

Less: Ten's printed but never issued $ (24,000.00) $ 517,971,278.50

Act of February 17, 1864 $ 456,142,990.50

Total Issued $ 1,554,087,354.00

Phillips 25

Appendix E.

Phillips 26

Appendix F

Phillips 27

Appendix G.

AMOUNT OF TAXES COLLECTED IN THE CONFEDERACY

Act of August 19, 1861 (Payable in Treasury Notes)

$ 17,446,736.28

Acts of April 24, 1863, February 17 and June 14,

1864

Tax in Kind $ 62,000,000.00

Tax payable in Treasury notes

$ 118,845,744.57

$ 180,845,744.57

Acts of March 11, and March 17, 1865

Duties and taxes collected in the Trans-Mississippi Dept.

and not shown above $ 5,768,457.42

Total Taxes Collected $ 204,060,938.27

Phillips 28

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