Significance of Taxation after Civil War

After the Civil War, new industries brought Americans not just new products, but also more spending money and leisure time than any generation had ever had before. Far flung railroad, oil, and steel

operations, along with those of every other business, needed middle managers who could oversee production and sales and then report back to business owners. These new “white collar” workers had steady incomes and free time. They bought nice clothing and novels, and went to the theater; their wives played lawn tennis and their children had ice cream to eat and toys to play with at newfangled parties given just for them on their birthday.

Big business brought comfort and entertainment to many Americans, but it also brought grinding poverty to many others. Workers sweating near factory furnaces and entrepreneurs forced out of markets by monopolists resented the power of industrialists. By 1880 they focused their anger on the fact that American industry held its extraordinary position because it was protected by a law that kept foreign goods out of America. That law was called a tariff.

Tariffs were essentially taxes on products coming into America. They meant that foreign goods could not compete with American products because, no matter how cheaply they could be produced, the addition of tariff fees to their selling costs would make them more expensive than American goods. Since American producers did not have to worry about foreign competition, the leaders in an industry could work together and set whatever prices they wished.

People squeezed in the new economy resented the fact that tariffs kept prices artificially high. It didn’t seem fair that laws should prop up business while workers barely scraped by on pennies and industrialists like J. D. Rockefeller and Cornelius Vanderbilt lived in mansions in New York City and built 70-room “cottages” in Newport, Rhode Island.

No one really knew what to do about the huge fortunes and great poverty of the post-Civil War years. When the Founding Fathers drafted the Constitution, no one could envision those sorts of extremes of wealth. Many late 19th-century Americans urged government to stop industrialists from joining together to set the high prices that made them so rich. Others pointed out that the Constitution had given government no power to break combinations of businessmen.

The Constitution did, though, give Congress the power to regulate the tariff. So, beginning in the 1880s, when the problems of industrialization began to become apparent, Americans who didn’t like the rise of big business clamored for Congress to lower the tariffs that kept foreign products out of the country. Foreign competition, they thought, would break the monopolies that American businessmen used to control the economy.

For the rest of the century, the tariff was the central issue in American politics. Debates over the tariff were really fights over whether the government should protect business or workers when it developed economic policy. Republican congressmen backed a high tariff because they insisted that protecting business would guarantee a healthy economy in which workers could find jobs. Democratic congressmen wanted to lower the tariff, because they insisted that the economy would collapse if people couldn’t afford to buy very much.

Republicans had invented the nation’s system of extensive tariffs in 1861 to develop new businesses and to raise money to pay for the Civil War. After the war, the tariff became their signature issue. Republicans controlled every branch of the national government from 1861 to 1875, but in that year, Democrats took control of the House of Representatives. Republicans got nervous. For the rest of the century, they focused all their energy on staying in power so they could keep the tariff high. They insisted that, if elected, Democrats would destroy the economy by lowering tariffs.

Republicans managed to protect their system of tariffs until 1913, when Democratic President Woodrow Wilson and a Democratic Congress finally lowered the tariffs and replaced the lost revenue with taxes. The fight over the government’s role in the economy switched for a struggle on tariffs to a fight over taxes, and few Americans even remember now why tariffs were so important to the late 19th century. But to people who lived after the Civil War, tariffs symbolized a much larger struggle between rich and poor, employers and workers, capital and labor. Tariffs were at the very heart of the questions raised by the new era of industry.

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