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Revenue Act of 1913
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Revenue Act of 1913
The Revenue Act of 1913, also known as the T1913, Underwood Tariff or the Underwood–Simmons Act (ch. 16, 38 Stat. 114), re-established a federal income tax in the United States and substantially lowered tariff rates. The act was sponsored by Representative Oscar Underwood, passed by the 63rd United States Congress, and signed into law by President Woodrow Wilson.
Wilson and other members of the Democratic Party had long seen high tariffs as equivalent to unfair taxes on consumers, and tariff reduction was President Wilson's first priority upon taking office. Following the ratification of the Sixteenth Amendment in 1913, Democratic leaders agreed to seek passage of a major bill that would dramatically lower tariffs and implement an income tax. Underwood quickly shepherded the revenue bill through the House of Representatives, but the bill won approval in the United States Senate only after extensive lobbying by the Wilson administration. Wilson signed the bill into law on October 3, 1913.
The Revenue Act of 1913 lowered average tariff rates from 40 percent to 26 percent. It also established a one percent tax on income above $3,000 per year; the tax affected approximately three percent of the population. A separate provision established a corporate tax of one percent, superseding a previous tax that had only applied to corporations with net incomes greater than $5,000 per year. Though a Republican-controlled Congress would later raise tariff rates, the Revenue Act of 1913 marked an important shift in federal revenue policy, as government revenue would increasingly rely on income taxes rather than tariff duties.
Democrats had long seen high tariff rates as equivalent to unfair taxes on consumers, and tariff reduction was President Wilson's first priority upon taking office. He argued that the system of high tariffs "cuts us off from our proper part in the commerce of the world, violates the just principles of taxation, and makes the government a facile instrument in the hands of private interests." While most Democrats were united behind a decrease in tariff rates, most Republicans held that high tariff rates were useful for protecting domestic manufacturing and factory workers against foreign competition. Shortly before Wilson took office, the Sixteenth Amendment, which had been proposed by Congress in 1909 during a debate over tariff legislation, was ratified by the requisite number of states. Following the ratification of the Sixteenth Amendment, Democratic leaders agreed to attach an income tax provision to their tariff reduction bill, partly to make up for lost revenue, and partly to shift the burden of funding the government towards the high earners that would be subject to the income tax.
By late May 1913, House Majority Leader Oscar Underwood had passed a bill in the House that cut the average tariff rate by 10 percent. Underwood's bill, which represented the largest downward revision of the tariff since the Civil War, aggressively cut rates for raw materials, goods deemed to be "necessities," and products produced domestically by trusts, but it retained higher tariff rates for luxury goods. The bill also instituted a tax on personal income above $4,000. Passage of Underwood's tariff bill in the Senate would prove more difficult than in the House, partially because some Southern and Western Democrats favored the continued protection of the wool and sugar industries, and partially because Democrats had a narrower majority in that chamber. Seeking to marshal support for the tariff bill, Wilson met extensively with Democratic senators and appealed directly to the people through the press. After weeks of hearings and debate, Wilson and Secretary of State William Jennings Bryan managed to unite Senate Democrats behind the bill. The Senate voted 44 to 37 in favor of the bill, with only one Democrat voting against it and only one Republican, progressive leader Robert M. La Follette, voting for it. Wilson signed the Revenue Act of 1913 into law on October 3, 1913.
The Revenue Act of 1913 reduced the average import tariff rates from approximately 40 percent to approximately 25 percent.
The Act established the lowest rates since the Walker Tariff of 1857. Most schedules were ad valorem basis, a percentage of the value of the item.
The duty on woolens went from 56% to 18.5%. Steel rails, raw wool, iron ore, and agricultural implements now had zero rates. The reciprocity program wanted by the Republicans was eliminated. Congress rejected proposals for a tariff board to fix rates scientifically, but it set up a study commission.
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Revenue Act of 1913
The Revenue Act of 1913, also known as the T1913, Underwood Tariff or the Underwood–Simmons Act (ch. 16, 38 Stat. 114), re-established a federal income tax in the United States and substantially lowered tariff rates. The act was sponsored by Representative Oscar Underwood, passed by the 63rd United States Congress, and signed into law by President Woodrow Wilson.
Wilson and other members of the Democratic Party had long seen high tariffs as equivalent to unfair taxes on consumers, and tariff reduction was President Wilson's first priority upon taking office. Following the ratification of the Sixteenth Amendment in 1913, Democratic leaders agreed to seek passage of a major bill that would dramatically lower tariffs and implement an income tax. Underwood quickly shepherded the revenue bill through the House of Representatives, but the bill won approval in the United States Senate only after extensive lobbying by the Wilson administration. Wilson signed the bill into law on October 3, 1913.
The Revenue Act of 1913 lowered average tariff rates from 40 percent to 26 percent. It also established a one percent tax on income above $3,000 per year; the tax affected approximately three percent of the population. A separate provision established a corporate tax of one percent, superseding a previous tax that had only applied to corporations with net incomes greater than $5,000 per year. Though a Republican-controlled Congress would later raise tariff rates, the Revenue Act of 1913 marked an important shift in federal revenue policy, as government revenue would increasingly rely on income taxes rather than tariff duties.
Democrats had long seen high tariff rates as equivalent to unfair taxes on consumers, and tariff reduction was President Wilson's first priority upon taking office. He argued that the system of high tariffs "cuts us off from our proper part in the commerce of the world, violates the just principles of taxation, and makes the government a facile instrument in the hands of private interests." While most Democrats were united behind a decrease in tariff rates, most Republicans held that high tariff rates were useful for protecting domestic manufacturing and factory workers against foreign competition. Shortly before Wilson took office, the Sixteenth Amendment, which had been proposed by Congress in 1909 during a debate over tariff legislation, was ratified by the requisite number of states. Following the ratification of the Sixteenth Amendment, Democratic leaders agreed to attach an income tax provision to their tariff reduction bill, partly to make up for lost revenue, and partly to shift the burden of funding the government towards the high earners that would be subject to the income tax.
By late May 1913, House Majority Leader Oscar Underwood had passed a bill in the House that cut the average tariff rate by 10 percent. Underwood's bill, which represented the largest downward revision of the tariff since the Civil War, aggressively cut rates for raw materials, goods deemed to be "necessities," and products produced domestically by trusts, but it retained higher tariff rates for luxury goods. The bill also instituted a tax on personal income above $4,000. Passage of Underwood's tariff bill in the Senate would prove more difficult than in the House, partially because some Southern and Western Democrats favored the continued protection of the wool and sugar industries, and partially because Democrats had a narrower majority in that chamber. Seeking to marshal support for the tariff bill, Wilson met extensively with Democratic senators and appealed directly to the people through the press. After weeks of hearings and debate, Wilson and Secretary of State William Jennings Bryan managed to unite Senate Democrats behind the bill. The Senate voted 44 to 37 in favor of the bill, with only one Democrat voting against it and only one Republican, progressive leader Robert M. La Follette, voting for it. Wilson signed the Revenue Act of 1913 into law on October 3, 1913.
The Revenue Act of 1913 reduced the average import tariff rates from approximately 40 percent to approximately 25 percent.
The Act established the lowest rates since the Walker Tariff of 1857. Most schedules were ad valorem basis, a percentage of the value of the item.
The duty on woolens went from 56% to 18.5%. Steel rails, raw wool, iron ore, and agricultural implements now had zero rates. The reciprocity program wanted by the Republicans was eliminated. Congress rejected proposals for a tariff board to fix rates scientifically, but it set up a study commission.
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