Underwood Tariff Act

Definition

The Underwood Tariff Act was a piece of legislation passed in 1913 that significantly reduced the tariff rates in the United States for the first time since the Civil War. It also implemented an income tax following the ratification of the 16th Amendment.

Analogy

Think of tariffs like a wall around a garden (the country's economy). The higher the wall, the harder it is for foreign goods (insects) to get in and affect local plants (domestic industries). The Underwood Tariff Act lowered this wall, allowing more foreign goods into our economic 'garden'.

Related terms

Protectionism: This is an economic policy where countries restrict imports from other countries through methods such as tariffs on imported goods, import quotas, and various other government regulations.

16th Amendment: An amendment to the U.S. Constitution that gave Congress the power to levy taxes on income without apportioning it among states or basing it on Census results.

Free Trade: An economic policy that allows businesses in different countries to trade without government interference or restrictions such as tariffs and quotas.