key term - Underwood Tariff Act

Definition

The Underwood Tariff Act, passed in 1913, was a significant piece of legislation that lowered tariffs and implemented a federal income tax in the United States. This act aimed to reduce the power of monopolies and promote competition by decreasing the protectionist tariffs that had dominated American trade policies for decades. It was a key achievement of the Progressive Era, reflecting the movement's goals of economic reform and greater government involvement in the economy.

5 Must Know Facts For Your Next Test

1. The Underwood Tariff Act significantly lowered average tariff rates from approximately 40% to about 25%, making it one of the largest reductions in U.S. history.
2. The act was named after Congressman Oscar W. Underwood, who played a pivotal role in its passage as the chair of the House Ways and Means Committee.
3. The Underwood Tariff Act introduced a graduated federal income tax, which allowed for higher tax rates on those with higher incomes, marking a shift towards more progressive taxation.
4. It aimed to eliminate certain monopolistic practices by increasing competition and making goods more affordable for consumers.
5. The passage of the Underwood Tariff Act demonstrated the influence of the Progressive Movement on American economic policy and set a precedent for future reforms.

Review Questions

• How did the Underwood Tariff Act reflect the goals of the Progressive Movement in terms of economic reform?
  • The Underwood Tariff Act reflected the goals of the Progressive Movement by reducing high tariffs that protected monopolies and limiting competition. By lowering tariffs and implementing a federal income tax, it aimed to create a fairer economic environment that benefited consumers rather than large corporations. This shift showed a commitment to reforming economic policies to promote fairness and competition, aligning with Progressive ideals.
• What were the immediate economic impacts of the Underwood Tariff Act on American consumers and businesses?
  • The immediate economic impacts of the Underwood Tariff Act included lower prices for consumers as tariffs were reduced on imported goods, making products more accessible. Businesses faced increased competition from foreign imports, which compelled them to improve efficiency and lower their prices. Additionally, the introduction of a federal income tax provided a new revenue source for the government, which would help fund public services and infrastructure projects.
• Evaluate the long-term significance of the Underwood Tariff Act in shaping modern American economic policy.
  • The long-term significance of the Underwood Tariff Act lies in its establishment of a federal income tax and its influence on subsequent tariff policies. By introducing a progressive tax structure, it set a precedent for how the U.S. government could generate revenue beyond tariffs. This act also shifted American economic policy towards favoring consumer access and competition over protectionism, paving the way for future reforms that would further enhance governmental involvement in regulating and stabilizing the economy.

Related terms

Progressive Movement:

A social and political movement that emerged in the late 19th and early 20th centuries, aimed at addressing issues caused by industrialization, urbanization, and corruption in government.

Federal Income Tax:

A tax imposed by the federal government on individual income, which was implemented alongside the Underwood Tariff Act to provide revenue as tariff rates were reduced.

Tariff:

A tax or duty imposed on imported goods, designed to protect domestic industries from foreign competition or to generate revenue for the government.