Business
Companies that generate revenue and employee labor and
that pay many of the taxes that fund the operation of the
American government.
Historically, the business community maintained the tax
base in the United States through the twentieth century and
as the twenty-first century began. Companies that imported
goods paid an import duty ranging from about 2 percent to
more than 50 percent depending on the product. After ratification of the U.S. Constitution, the federal government relied
on these revenue tariffs to pay off the fledgling nation’s debt.
As early as 1792, Secretary of the Treasury Alexander Hamilton in his Report on the Subject of Manufactures encouraged
Congress to assist businesses, especially manufacturers, by
erecting high protective tariffs. Although Congress rejected
Hamilton’s recommendations, by 1816 it recognized the need
for a stronger manufacturing base in the United States to
provide for the home market. Passage of the first protective
tariff in 1816 signaled the beginning of a period of high protectionism that intensified during and after the Civil War.
When the United States emerged from the Civil War,
Congress continued to repeatedly increase tariff duties and
thus stimulate business, even though the government experienced many years of fiscal surpluses. As a result, big business
flourished. Individuals such as Andrew Carnegie, John D.
Rockefeller, and J. P. Morgan operated businesses freely
without the threat of foreign competition. However, abuses
experienced by laborers during this period eventually created
a backlash against business that pushed Congress into passing such acts as the Sherman Anti-Trust Act and the Clayton
Anti-Trust Act. Even with government prohibition of
monopolies, the tendency remained to encourage big business, especially up to 1913, when a large portion of government revenue shifted from the tariff to a graduated personal
income tax. Ratification in 1913 of the Sixteenth Amendment, which authorized a personal income tax, transferred a
large portion of the burden of taxation from the business
community to individuals. However, business continues to
constitute a large portion of the taxes. During the Great
Depression, despite the fact that the government now collected the personal income tax, tariff rates again increased as
a result of the Hawley-Smoot Tariff—reaching an average
level of about 50 percent on many items. Because many economists believed that the Hawley-Smoot Tariff of 1930 led to
World War II because of the disruption of international trade
and a worldwide depression, American officials after that war
advocated free trade over protectionism. By this time, however, business in the United States had matured and no longer
required government protection.
Because the United States operates under a capitalist system and business continues both to stimulate the economy
and to provide revenue for the federal government, business
will continue to enjoy a position of importance in the United
States.