Wilson's New Freedoms
Woodrow Wilson was only the second Democratic president since the Civil War and the first teacher — a professor at Princeton — ever elected president. He promised a program of New Freedoms, which included antitrust action, tariff revision, and reform in banking.
A man of serious purpose (and the second great president, after Teddy Roosevelt, to be a historian), Wilson went after a clear program and got what he fought for on the domestic front.
He got real reductions in the cost of imported goods in the Underwood Tariff Bill (1913). By taking the unprecedented step of going to Congress himself and appealing to the American people to watch their representatives for last-minute special-interest tricks, Wilson got a bill that really reduced import fees. Because the passage of the Sixteenth Amendment (1913) allowed for an income tax, Congress slapped on a modest charge on all incomes over the equivalent of $65,000 in modern money ($3,000 back then). By 1917, income tax passed tariff receipts as the largest share of the federal income.
Question: When did taxes on imports stop being the largest share of federal income?
Answer: With the passage of the income tax in 1917.
The Federal Reserve Act
Clearly, the banking system needed some help. The Banker's panic of 1907 had shown that the government could ease financial downturns if it had some extra cash to throw into the game when times got tough. Wilson went directly to Congress and got the Federal Reserve Act (1913), one of the most important economic landmarks in U.S. history and still the law of the land.
What the Federal Reserve Act did was establish a national system of 12 privately owned regional banks under the central authority of the Federal Reserve Board appointed by the president and Congress. In this public/private establishment, the regional banks can issue Federal Reserve System Notes for private money backed by the government, but only under direction from the government-controlled Federal Reserve Board.
With the power of private enterprise and the control of central government policy, the government spaced the regional banks around the country to try to minimize the control of Wall Street New York money. Still, New York remained the financial capital no matter how many solid-looking bank buildings the rest of the country got.