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History of the United States by Charles A. Beard and Mary R. Beard
» PART VI. NATIONAL GROWTH AND WORLD POLITICS
» CHAPTER XIX

«·The Currency Question · The Railways and Trusts·»


The Protective Tariff and Taxation

Fluctuation in Tariff Policy.—As each of the old parties was divided on the currency question, it is not surprising that there was some confusion in their ranks over the tariff. Like the silver issue, the tariff tended to align the manufacturing East against the agricultural West and South rather than to cut directly between the two parties. Still the Republicans on the whole stood firmly by the rates imposed during the Civil War. If we except the reductions of 1872 which were soon offset by increases, we may say that those rates were substantially unchanged for nearly twenty years. When a revision was brought about, however, it was initiated by Republican leaders. Seeing a huge surplus of revenue in the Treasury in 1883, they anticipated popular clamor by revising the tariff on the theory that it ought to be reformed by its friends rather than by its enemies. On the other hand, it was the Republicans also who enacted the McKinley tariff bill of 1890, which carried protection to its highest point up to that time.

The Democrats on their part were not all confirmed free traders or even advocates of tariff for revenue only. In Cleveland’s first administration they did attack the protective system in the House, where they had a majority, and in this they were vigorously supported by the President. The assault, however, proved to be a futile gesture for it was blocked by the Republicans in the Senate. When, after the sweeping victory of 1892, the Democrats in the House again attempted to bring down the tariff by the Wilson bill of 1894, they were checkmated by their own party colleagues in the upper chamber. In the end they were driven into a compromise that looked more like a McKinley than a Calhoun tariff. The Republicans taunted them with being “babes in the woods.” President Cleveland was so dissatisfied with the bill that he refused to sign it, allowing it to become a law, on the lapse of ten days, without his approval.

The Income Tax of 1894.—The advocates of tariff reduction usually associated with their proposal a tax on incomes. The argument which they advanced in support of their program was simple. Most of the industries, they said, are in the East and the protective tariff which taxes consumers for the benefit of manufacturers is, in effect, a tribute laid upon the rest of the country. As an offset they offered a tax on large incomes; this owing to the heavy concentration of rich people in the East, would fall mainly upon the beneficiaries of protection. “We propose,” said one of them, “to place a part of the burden upon the accumulated wealth of the country instead of placing it all upon the consumption of the people.” In this spirit the sponsors of the Wilson tariff bill laid a tax upon all incomes of $4000 a year or more.

In taking this step, the Democrats encountered opposition in their own party. Senator Hill, of New York, turned fiercely upon them, exclaiming: “The professors with their books, the socialists with their schemes, the anarchists with their bombs are all instructing the people in the … principles of taxation.” Even the Eastern Republicans were hardly as savage in their denunciation of the tax. But all this labor was wasted. The next year the Supreme Court of the United States declared the income tax to be a direct tax, and therefore null and void because it was laid on incomes wherever found and not apportioned among the states according to population. The fact that four of the nine judges dissented from this decision was also an index to the diversity of opinion that divided both parties.


«·The Currency Question · The Railways and Trusts·»