Underwood Tariff Act
The Underwood Tariff Act, officially known as the Revenue Act of 1913, was a significant piece of legislation initiated by President Woodrow Wilson during a special session of Congress in April 1913. This act marked a pivotal moment in U.S. history as it was the first time a president addressed a joint session of Congress in over a century, emphasizing a commitment to lowering tariffs to reduce the cost of living for citizens. Congressman Oscar Underwood played a crucial role in guiding the bill through the House, where it was passed relatively quickly. The Senate, however, faced lobbying pressures, delaying the bill's passage until September. Ultimately, the act achieved a substantial reduction in tariff rates, lowering the average from 41% to 27%, the lowest in over fifty years.
In addition to reducing tariffs, the Underwood Tariff Act also introduced a federal income tax to compensate for the anticipated loss of revenue, following the ratification of the Sixteenth Amendment earlier that year. Initially, this income tax affected only a small portion of the population and was not viewed as a major aspect of the legislation. Furthermore, the act established the Federal Tariff Commission to provide expert advice on tariff rates, which continues to function today as the International Trade Commission. This set of reforms aimed not only to address economic concerns but also to modernize the fiscal policies of the United States.
Subject Terms
Underwood Tariff Act
The Law Federal legislation that reduced import tariffs and created the federal income tax
Date Signed into law on October 3, 1913
Initially touted as an act to lower tariffs, the longer term significance was the manner in which the act attempted to offset the loss of tariff revenue—namely by creating the federal income tax on individuals. Consumers were provided with competitively priced products, and manufacturers were encouraged to be more efficient in their production processes.
Also known as the Revenue Act of 1913, the Underwood Tariff Act was called for by President Woodrow Wilson in a special session of Congress in April, 1913. Wilson’s call for a reduction in tariffs marked the first time that a president had spoken to a joint session of Congress in more than one hundred years. As a result, there was heavy media coverage of Wilson’s move to lower the average citizen’s cost of living. Congressman Oscar Underwood of Alabama shepherded the bill through the House, and it passed easily in May, 1913. The Senate, however, was influenced by lobbyists. It was not until September that the bill passed. The law reduced tariffs to the lowest that they had been in more than fifty years. The average rate went from 41 to 27 percent.
To compensate for the lost revenue, the act created a federal income tax. The Sixteenth Amendment to the Constitution had been ratified on February 3, 1913, allowing for an income tax. Initially, the income tax applied to few individuals, and this aspect of the act was not considered significant.
Also included in the act was a provision to allow the establishment of an independent study commission to provide the president and Congress with advice on the proper rates for tariffs. The Federal Tariff Commission was created in 1916 to collect expert information on the fiscal and industrial effects of customs duties. The commission still exists in the twenty-first century under the name of the International Trade Commission.