Payne–Aldrich Tariff Act

From the inception of the Republican Party in the 1850s and particularly after the 1880s, Republican candidates and supporters had embraced the American system of political economy and Hamiltonian vision of a protective tariff for the promotion of industrial development. Under this system, high tariff rates were intended to promote higher sales of domestic goods and higher wages for industrial workers; critics argued that the system taxed consumers. In 1896, William McKinley was elected president on a platform proposing tariff increases and his own record as an advocate for protective tariffs. The Dingley Act of 1897 placed average rates on imports at 47% and remained in effect until 1909. By 1908, however, protective tariffs had begun to fall out of public favor. The growing consolidation and monopolization of heavy industry, in particular the political power of U.S. Steel and Standard Oil Company, had led to public criticism and rejection of the system of high protective tariff rates. In addition to traditional Democratic opposition, progressive insurgents within the Republican Party, primarily from the Midwest, criticized protective tariffs for promoting monopoly. As a result, the platform adopted at the 1908 Republican National Convention called for revision of rates until they "equal the difference between the cost of production at home and abroad, with a reasonable profit to American industry." This plank, according to The New York Times, was taken as a "freed-trade plank as to very large portions of our actual and possible foreign commerce." ==Legislative history==

On November 10, 1908, two days after Taft's election, the United States House Committee on Ways and Means opened public hearings on tariff revision which lasted until the holiday recess on December 24. It appeared to much of the country that he had endorsed the traditional Democratic Party position of a tariff for the purpose of government revenue only (and not for industrial protection). Because tariff legislation is a form of tax policy, all tariff bills originated in the United States House of Representatives, with Payne's committee. On March 17, 1909, Payne introduced an initial draft bill that called for reductions, although he was a protectionist. However, during the House debate over the bill, several representatives introduced revisions to increase rates on products manufactured in their districts with support from Speaker Cannon. Despite these revisions, Taft reacted favorably when the House bill passed 21761 and refused to threaten a veto or to withhold federal patronage from the opponents of reform. == Contents ==

One provision of the law provided for the creation of a tariff board to study the problem of tariff modification in full and to collect information on the subject for the use of Congress and the President in future tariff considerations. Another provision allowed for free trade with the Philippines, then under American control. Congress passed the bill officially on April 9, 1909. The bill states it would "take effect the day following its passage." ==Reaction and impact==

Political reaction Taft hoped that the act would stimulate the economy and enhance his political standing. He praised the provision empowering the president to raise rates on countries which discriminated against American products and the provision for free trade with the Philippines. Taft embarked on a speaking tour in September 1909, speaking across the country in support of the PayneAldrich Act, visiting Boston, Chicago, Milwaukee, and other cities. At Winona, Minnesota, Taft said it was "the best tariff bill the Republican Party ever passed." In particular, the increased duty on print paper led the publishing industry to viciously criticize Taft, further tarnishing his image, and the Congress. Some critics charged that Taft should have more actively pressed Congress for reductions. This split led to the party's losses in the 1910 elections and a challenge against Taft by his predecessor, Theodore Roosevelt, in the 1912 presidential primaries. After Taft won the nomination at the 1912 Republican National Convention, Roosevelt contested the general election on an independent ticket and split the Republican vote, resulting in the election of Woodrow Wilson, the Democratic nominee. During the next Congress, Wilson signed the Revenue Act of 1913, lowering tariff rates across the board and introducing the first federal income tax. Thereafter, the United States government relied on income taxes for an increasing proportion of revenues. Academic reactions In an article for the Quarterly Journal of Economics, F. W. Taussig wrote that the congressional debates about the tariffs were "depressing for the economist. There is hardly a gleam of general reasoning of the sort which is applied in our books to questions of international trade... That there should be general acceptance of the protectionist principle, and that the only question in debate should be whether duties were "unreasonably" high, was natural enough. Most people get used to existing conditions, and cannot easily conceive of anything different." Legal challenges The corporate tax provision was challenged and affirmed by the United States Supreme Court in Flint v. Stone Tracy Co. ==References==