Revenue Act of 1913

Revenue Act of 1913

The United States Revenue Act of 1913 also known as the Tariff Act, Underwood Tariff, or Underwood-Simmons Act (ch. 16, USStat|38|116, October 3, 1913), re-imposed the federal income tax following the ratification of the Sixteenth Amendment and lowered basic tariff rates from 40% to 25%, well below the Payne-Aldrich Tariff Act of 1909. It was signed into law by President Woodrow Wilson on October 3, 1913, and was sponsored by Alabama Representative Oscar Underwood.


President Woodrow Wilson summoned a special session of Congress in April 1913. His immediate objective was to confront the perennial tariff question,Fact|date=September 2008 and he brought special attention to the matter by deciding to appear in person before Congress to make his appeal. He was the first president since John Adams to do so. [Boorstin, Daniel J. and Kelly, Brooks Mather. A history of the United States. Needham MA: Prentice Hall, 1996.] Fact|date=September 2008

The joint session was a spectacular event. A huge crowd gathered and every seat in the House chamber was taken.Fact|date=September 2008 Newspaper coverage was intense. Wilson spoke only briefly, but made it clear that tariff reform was needed, and that he would not be a party to a repeat of the embarrassment of the thwarted reform of 1894. The burden was clearly on Democratic shoulders because they controlled both houses of Congress for the first time in 18 years.Fact|date=September 2008

Oscar W. Underwood of Alabama guided a reform measure through the House, but his counterpart in the Senate, F.M. Simmons of North Carolina, reverted to form and allowed numerous increases in rates to be added. Wilson, unlike many of his predecessors, took the offensive. He went to the Capitol and twisted the arms of backsliding Democrats;Fact|date=September 2008 he also warned the public of the invasion of Washington then underway by scores of lobbyists. The president was successful with generating a public reaction. Angry constituents wrote their congressmen and demanded tariff reform.Fact|date=September 2008

The Revenue Act of 1913 passed the House, 281 to 139, in May, 1913. Wilson used his patronage powers to guide it to Senate passage 44 to 37, in September, 1913. Politically it was considered a major triumph for President Woodrow Wilson.

The 1913 Act established the lowest rates since the Walker Tariff of 1857. Most schedules were put on an ad valorem basis (that is, X% of the dollar value of the item). The duty on woolens went from 56% to 18.5%. Steel rails, raw wool, iron ore, and agricultural implements had zero rates. The reciprocity program the Republicans had been pushing was eliminated. Congress rejected proposals for a tariff board to scientifically fix rates, but did set up a study commission.

The Underwood-Simmons measure vastly increased the free list, adding woolens, iron, steel, farm machinery and many raw materials and foodstuffs. The average rate was approximately 26 percent.

Income tax

The Act also provided for the reinstitution of a federal income tax as a means to compensate for anticipated lost revenue because of the reduction of tariff duties. The most recent effort to tax incomes (Wilson-Gorman Tariff of 1894) had been declared unconstitutional by the Supreme Court because the tax on dividends, interest, and rents had been deemed to be a direct tax not apportioned by population. That obstacle, however, was removed by ratification of the Sixteenth Amendment on February 3, 1913. [Brushaber v. Union Pacific Railroad] The incomes of couples exceeding $4,000, as well as those of single persons earning $3,000 or more, were subject to a one percent federal tax. Further, the measure provided a progressive tax structure, meaning that high income earners were required to pay at higher rates.

It would require only a few years for the federal income tax to become the chief source of income for the government, far outdistancing tariff revenues.

Less than 1 % of the population paid federal income tax at the time.

The act was applicable to incomes for 1913, 1914, and 1915. [ [ Surtax rates under the Revenue Acts 1913-1926] ]

Income Tax Table for Individuals

A Normal Income Tax and an Additional Tax were levied against the net income of individuals as shown in the following table.

(Exemption of $3,000 for single filers and $4,000 for married couples.)

Incomes Adjusted for Inflation - Bureau of Labor Statistics (BLS)

[ Adjusted for inflation] by the average Consumer Price Index (CPI):

*Note: In 2008 dollars, the current personal exemption ($3,500) + standard deduction ($5,450) for single filers is 13.5% of the 1913 exemption (i.e., $8,950/$66,300). In 2008 dollars, the current personal exemptions ($7,000) + standard deduction ($10,900) for married couples filing jointly is 20.2% of the 1913 exemption (i.e., $17,900/$88,400).


It is impossible to offer a meaningful judgment on the impact of the Underwood-Simmons Tariff because the entire international economic picture was soon upset by the outbreak of World War I. American products were in great demand throughout the world, making the question of protectionism moot. The next reordering of national tariff policy would not occur until after the war ended in the Fordney-McCumber Tariff of 1922.



* Arthur H. Cole. "The Domestic and Foreign Wool Manufactures and the Tariff Problem" "Quarterly Journal of Economics", Vol. 36, No. 1 (Nov., 1921) , pp. 102-135
* Arthur Link. "Woodrow Wilson: vol 2, The New Freedom"
* MJ Crucini. "Sources of Variation in Real Tariff Rates: The United States, 1900-1940" "The American Economic Review", 1994 - in JSTOR

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