The War to Create Many Large Fortunes
After the departure of conservative Southern congressmen in 1861, the old Whigs in the Republican party went unrestrained in their merger of government and corporations. Historian Charles Beard would later write of the War that it was not easy to tell “where slavery as an ethical question left off and economics – the struggle over the distribution of wealth – began.”
Bernhard Thuersam, www.Circa1865.com
The War to Create Many Large Fortunes
“As the election of 1872 approached, the tax and tariff issues were potent enough for [President Ulysses] Grant to take at least some action. Trying to shore up support among farmers and others, Congress approved a 10 percent reduction in tariffs on most items including cotton and wool textiles, iron, steel, paper, glass and other items. But these were baby steps with marginal impact, designed to preserve the whole protectionist system.
Throughout the assault on the [Civil War] income tax, opponents had considered the step of going to court to challenge the tax’s constitutionality. Some suits were filed, and parts of the tax were upheld by various courts, including the Supreme Court. But as the expiration of the tax approached, there did not seem to appear much sentiment in Congress to continue it anyway. Senator [John] Sherman [brother of General Sherman] fought once again to keep the tax alive. He asserted that one of the most solemn obligations of the federal government was to protect the property of Americans. It was therefore only proper “to require property to contribute to their payment.”
Sherman’s appeal was to no avail. Congress was more sensitive to the demands of the growing number of wealthy entrepreneurs, investors, and tycoons, who were at their moment of maximum influence. The power of the new wealthy rested on the newly consolidated railroads and the many large fortunes create by the Civil War.
The landscape of wealth had changed. Whereas New York City had had a handful of millionaires before the conflict, there were hundreds of millionaires afterward. Their fortunes were in the tens of millions of dollars. A.T. Stewart, the dry goods magnate, was worth $50 million, and other millionaires, such as William B. Astor, Cornelius Vanderbilt, and the banker Moses Taylor, were not far behind.
Before Congress abolished the publication of income tax returns, it was reported that Astor had paid more than $1 million in income tax, while Vanderbilt and Taylor had paid more than $500,000. After the war, many millionaires routinely engaged in tax evasion or tricks to hide their income. What they did not bother to hide was their vast influence.
In 1869, Grant’s friend Jim Fisk worked with [Northern financier] Jay Gould to monopolize the market in gold, driving up its price so they could make a killing. Instead, on “Black Friday,” September 24, 1869, a collapse in gold prices engulfed a vast number of speculators and investors.
Fisk and Gould managed to bribe enough officials to avoid prosecution, and Fisk remained close to his trusting friends in the White House. Years later the Credit Mobilier scandal revealed that the construction company owned by stockholders of the Union Pacific Railroad had ensnared many prominent members of the Grant administration and Congress.
As tax the historian Sidney Ratner notes, the Civil War debt “became one of the most powerful instruments in America for the enrichment of the rentier class, the leading capitalists. For the next forty years, farmers, workers, small merchants and other working-class Americans carried this debt burden, to the benefit of the rich.”
(The Great Tax Wars, Lincoln to Wilson, Steven R. Weisman, Simon & Schuster, 2002, pp. 99-101)