VIII. Savings During the Presidency
We have laid by some money, and during this term we will try and save up more, but shall not have enough to support us. We will go back to Illinois, and I will open a law-office at Springfield or Chicago, and practice law, and at least do enough to help give us a livelihood.
LINCOLN'S STATEMENT TO HIS WIFE, April 14, 1865.
LINCOLN saved much of the salary which he received as President of the United States. The assertion of many authors that he was careless and shiftless in his personal finances is not borne out by a study of his savings during these years. His estate grew from $15,000 in 1861 to more than $85,000 at his death. The increment came principally from his $25,000 yearly salary as President.
Lincoln received forty-nine warrants in payment of his salary. Nine|teen of these he deposited in Washington banks; with twenty-six he pur|chased government obligations; four were found in his desk after his death. A fiftieth warrant, issued in payment of his salary for the partial month of April, 1865, was paid to the administrator of his estate.
Lincoln opened an account with Riggs & Co., Washington bankers, and deposited his first salary warrant there on April 5, 1861. He depos|ited seventeen other warrants, the last on January 31, 1865.1 He made no effort to maintain a large balance, simply making deposits as they were needed. Only four deposits, other than salary warrants, were made to the Riggs & Co. account. Two of these were for amounts of $650. In both cases Lincoln had written a check in the same amount a few days before the deposit. Altogether, 222 checks, totalling $37,423.31, were written on Riggs & Co. Among them were two which have survived to Page 125 become deservedly famous—one, for $5.00, to "Tad when he is well enough to present;" the other, also for $5.00, to "Colored man, with one leg."
Beginning in the spring of 1864, a monthly withdrawal of $800 is shown on the Riggs & Co. ledger; this continues until March, 1865. It is surmised that this amount was used to pay family expenses. After Lincoln's death, Riggs & Co. turned over a balance of $1,373.53 to Lin|coln's estate.2
Lincoln's salary warrant for August, 1864, in the amount of $1,981.66, was deposited in the First National Bank of Washington. Probably this deposit was made by mistake by George Harrington, As|sistant Secretary of the Treasury, who handled Lincoln's personal finan|ces during the last nine months of his life. From this account Lincoln withdrew $800 in March, 1865, and $800 in April. The balance of $381.66 was turned over to his estate.3
For financing the Civil War, loans were the government's principal reliance. Laws passed in the summer of 1861 authorized large bond issues and an issue of $140,000,000 in Treasury Notes. The bonds bore interest at 6%; the notes carried a rate of 7.3% (two cents a day on $100) which was payable in gold semi-annually, and were commonly known as (7-30) "seven-thirties."
Believing at first that the war would be short, the administration was reluctant to tax heavily. However, the revenue bill of August 5, 1861, did call for new levies, among them an income tax of three per cent on all annual income in excess of $800. This tax was to be paid June 30, 1862, but Congress met before that date and reported a new bill. The House committee which reported the bill made clear their antipathy to an income tax, but under the circumstances, one was un|avoidable. The tax, their report said plaintively, was an "inquisitorial one at best; but, upon looking into the considerable class of state officers, Page 126 and the many thousands who are employed on a fixed salary, most of whom would not contribute a penny unless called upon through this tax, it has been thought best not to wholly abandon it."4
Income tax was first collected under the general revenue act, ap|proved July 1, 1862. A tax was imposed upon the salaries of federal officials at the rate of three per cent on incomes in excess of $600, and the disbursing officers were required to withhold the "income duty," as it was called, at the time of the payment of the salary.
Some time was required to set up the machinery of collection, with the result that the first withdrawal of $61 from Lincoln's salary warrant was not made until September, 1862. Thereafter his warrant was re|duced from $2,083.33 to $2,022.33 a month. The continuance of the war and the pressing need of more revenue led to the enactment of a new law on June 30, 1864. Under its provisions salaries of federal offi|cials were taxed at five per cent on annual income above $600. With|holding $91.66 each month, the Treasury issued Lincoln's warrants in amounts of $1,981.67 from July 4, 1864 until the time of his death.
Congress, by joint resolution on July 4, 1864, imposed an additional special income tax to defray expenditures for the war bounties. This called for the payment of five per cent on all income received in 1863. Lincoln paid this special tax in the amount of $1,279.13, on December 15, 1864. This figure represented five per cent of his salary of $25,000 less the $600 exemption, and additional income of $1,183 from interest from 7-30 Treasury Notes.5
Soon after the passage of the income tax law in 1862, newspapers asserted that President Lincoln was exempt from paying the tax, but that he was paying the tax by his own desire.6 Attorney General Hoar, in an opinion rendered to the Secretary of the Treasury in 1869, held that the Constitution in the first section of the second article prohibited Page 127 the diminution of the salaries of justices of the Supreme Court and the President during their respective terms of office; and that this prohibi|tion extended to the deduction from such salaries of an income tax.7 On April 25, 1872, Administrator Davis filed a claim with the Treasury for a refund of Lincoln's tax payments of $2,305.94 from his salary and $1,250 paid under the joint resolution of Congress of July 4, 1864. The Treasury allowed the claim, and a warrant for $3,555.94 was issued to Davis. The money was placed by him to the credit of Robert T. Lincoln in the First National Bank, Washington, D.C. Mrs. Lincoln and her son sent their joint receipt to the administrator on May 14, 1872. Income tax was refunded to all members of the United States Supreme Court.8
Lincoln made his first purchase of government bonds on March 15, 1862. At that time he had on hand seven salary warrants for the months of July, 1861, through January, 1862. With the money received for them Lincoln purchased $14,200 of 7-30 Treasury Notes. The notes bore interest payable in gold from date of purchase. The president used his salary warrant for March, 1862, to purchase $2,000 more of the same issue. This was his last purchase of 7-30 notes.9
A third purchase from the Treasury was made by Lincoln on August 1, 1863. Congress, under various acts, made provision for temporary loans of not less than thirty days, with rates from four to six per cent. Under these acts Lincoln turned over eleven salary warrants for the months of August, 1862, to June, 1863, totaling $22,306.67, for a Certifi|cate of Temporary Loan at five per cent. The interest was payable in currency.
Lincoln's fourth purchase of securities, and his second purchase of temporary loan certificates, was made August 18, 1863, when he took his salary warrant for the previous month, and $1,852.40 in cash, and bought a certificate in the amount of $3,874.73. The cash represented Page 128
By these four transactions Lincoln had invested $16,200 in 7-30 notes and $26,181.40 in Certificates of Temporary Loan, making a total of $42,381.40. His fifth and last purchase, made on January 12, 1864, was of $8,000 of 5-20s issued under the Act of February 25, 1862. These Page 129 bonds were redeemable after five years, matured twenty years from date, and bore six per cent interest payable in gold on May 1 and November 1. This purchase Lincoln made with his salary warrants for August to December, 1863. None of the moneys with which he bought govern|ment securities passed through his account in Riggs & Co., the First National Bank, or the Springfield Marine and Fire Insurance Company.
By this time, Lincoln's purchases of government securities had be|come confusing to him. With problems of the war occupying his every waking minute, he had no time for personal affairs. Therefore he asked Salmon P. Chase to have his purchases consolidated into one type of government bonds. Chase promised to have this done. Lincoln made a list of his holdings, pocketed everything at hand, walked over to the Treasury Department and emptied the contents of his pockets on Chase's desk.
Maunsell B. Field, Assistant Secretary of the Treasury, described Lincoln's arrival as follows:
I happened once to be with the Secretary when the President, without knock|ing, and unannounced, as was his habit, entered the room. His rusty black hat was on the back of his head, and he wore, as was his custom, an old gray shawl across his shoulders. . . . I said good morning to Mr. Lincoln, and then, as was the established etiquette when the President called, withdrew. . . . In less than five minutes I was summoned to return to the Secretary. Mr. Schuckers, his pri|vate secretary, entered the room at the same time that I did. The President was gone, and there was lying upon one end of Mr. Chase's desk a confused mass of Treasury notes, Demand notes, Seven-thirty notes, and other representatives of value. Mr. Chase told us that this lot of money had just been brought by Mr. Lincoln, who desired to have it converted into bonds.10
Lincoln's holdings in government obligations totaled $54,515.07, and he brought along a bag of gold amounting to $883.30. Chase turned the securities over to Harrington, Assistant Secretary, for investment. In addition to the gold Harrington found five different kinds of assets: $16,000 of 7-30 notes; $26,181.40 of Certificates of Deposit; $8,000 of 5-20 bonds; $4,044.67 in salary warrants, and $89 in greenbacks. He Page 130 collected the interest due and sold the gold to the Treasury at a pre|mium of 188. He then took the proceeds to the First National Bank and purchased $32,800 of bonds of 1881, bearing six per cent interest and payable in gold. On these he paid a premium of four per cent, making the total purchase price $34,112. He then converted the $16,200 of 7-30s into the same amount of bonds of 1881.
By these transactions Lincoln became the owner of $49,000 in bonds of 1881 which, with the $8,000 of 5-20 bonds, made a total of $57,000. Harrington collected the interest on this amount at the end of 1864, selling the gold to the Treasury at a premium of 177. The $2,781.04 received was invested in a Certificate of Temporary Loan bearing six per cent interest. Interest for 1865 was collected by the administrator of Lincoln's estate.11
Lincoln received almost $10,000 in interest and premiums on sav|ings from his salary which he reinvested almost in its entirety. He could have increased this amount by more than $2,000 if he had invested his warrants at the time he received them. At one time he had seven war|rants, on another occasion eleven, and at his death the administrator found four warrants in his desk.