The Committee on Finance is one of the original committees established in the Senate. First created on December 11, 1815, as a
select committee and known as the Committee on Finance and an [sic] Uniform National Currency, it was formed to alleviate economic issues arising from the War of 1812. On December 10, 1816, the Senate officially created the Committee on Finance as a
standing committee. Originally, the committee had power over tariffs, taxation, banking and currency issues and appropriations. Under this authority the committee played an influential role in the most heated topics of the era, including numerous tariff issues and the
Bank War. The committee was also influential in the creation of the
Department of Interior in 1849. Under the leadership of
William Pitt Fessenden, the committee played a decisive role during the
Civil War. Appropriating all funds for the war effort as well as raising enough funds to finance the war through tariffs and the nation's first income tax. Additionally, the committee produced the Legal Tender Act of 1862, the nation's first reliance on paper currency. In 1865 the
House of Representatives created an
Appropriations Committee to relieve the burden from the
Committee on Ways and Means. The
Senate followed this example by forming the
Senate Appropriations Committee in 1867. The committee also continued to play a role in the debate over income taxes. The repeal of the Civil War income taxes in the 1870s would eventually be raised in 1894 with the passage of a new income tax law. The Supreme Court's decision in ruled the income tax as unconstitutional, since it was not based on apportionment. The fight for an income tax finally culminated with the
Payne–Aldrich Tariff Act of 1909. In order to pass the new tariff Senate leaders, including Chair
Nelson Aldrich, allowed for a Constitutional Amendment to be passed. Four years later the
16th Amendment was officially ratified and in 1913 the nation's first peacetime income tax was instituted. Around that same time the committee lost jurisdiction over banking and currency issues to the newly created
Committee on Banking and Currency. The committee did gain jurisdiction over veterans’ benefits when it successfully passed the War Risk Insurance Act of 1917. The act shifted pensions from gratuities to benefits and served as one of the first life insurance programs created under the federal government. This series of improved veteran benefits reached a crescendo in 1944 with the passage of the
Servicemen's Readjustment Act. Senator
Bennett "Champ" Clark, who served as the chair of the Subcommittee on Veterans, assured smooth sailing of the bill through the Senate. The bill not only ended the usual demands from returning veterans that had been seen in nearly every war the US had participated in, but also provided more generous benefits than veterans had previously received, including funds for continuing education, loans and unemployment insurance. Not all Finance Committee legislation was as well received as the G.I. Bill. At the beginning of the
Great Depression the committee passed the
Smoot–Hawley Tariff Act. The act greatly increased tariffs and had a negative effect on the nation's economy. Following traditional economic practices the members of the committee, including Chair
Reed Smoot, felt that protection of American businesses was required in order to buoy them during the dire economic times. The effort backfired and the economic situation worsened. The Smoot-Hawley Tariff would eventually be replaced by the
Reciprocal Tariff Act of 1934 which authorized the president to negotiate trade agreements. This act not only set up the trade policy system as it exists today but also effectively transferred trade making policy from the Congress to the president. The committee also played an important role in two major acts created under the
New Deal. The committee received jurisdiction over the
National Industrial Recovery Act because of tax code changes in the bill. The new bureaucracy was President
Franklin D. Roosevelt's attempt to stimulate the economy and promote jobs for unemployed Americans while also regulating businesses. The National Recovery Administration would ultimately fail as it lost public support, but the act served as a springboard for the
Wagner Act and the
National Labor Board. Probably the largest and most lasting pieces of legislation shaped by the Finance Committee during the New Deal was the 1935
Social Security Act. Once again, the committee received jurisdiction owing to the payroll taxes that would be enacted to pay for the new program. The act was the first effort by the federal government to provide benefits to the elderly and the unemployed, leading to enhanced economic welfare for many elderly Americans. In 1981, a Senate Resolution required the printing of the history of the Committee on Finance. ==Role==