Tax Reconciliation: Scope of the Senate's Power Under the Constitution's Origination Clause to Amend Revenue Legislation
Released: 2005-12-21T00:00:00

Introduction

This report discusses opinions of the Supreme Court and some lower courts that haveelucidated the meaning of the Origination Clause of the Constitution and delineated the Senate'spower to amend bills to raise revenue. It does not address parliamentary precedents of the Houseand Senate, which generally have interpreted the Clause more restrictively than the courts. (1)

Text and Purpose of the Origination Clause

Section 7, clause 1 of Article I of the United States Constitution, known as the OriginationClause, provides that:

All bills for raising revenue shall originate inthe House of Representatives; but the Senate may propose or concur with amendments as on otherbills.

The framers of the Constitution drafted this provision because they believed that theMembers of the House of Representatives, who are elected directly by the people for two year termsrather than six year terms like Senators, should be granted power to originate bills for raisingrevenue, but that the Senate should be able to amend them as on other bills. James Madison wrotein The Federalist No. 58 that:

. . . one branch of the legislature is arepresentation of the citizens, the other of the states: . . . The House of Representatives cannot onlyrefuse, but they alone can propose the supplies requisite for the support of the government. Theyalone, in a word, hold the purse -- that powerful instrument by which we behold, in the history of theBritish Constitution, an infant and humble representation of the people gradually enlarging thesphere of its activity and importance, and finally reducing, as far as it seems to have wished, all theovergrown prerogatives of the other branches of the government. The power over the purse may,in fact, be regarded as the most complete and effectual weapon with which any constitution can armthe immediate representatives of the people, for obtaining a redress of every grievance, and forcarrying into effect every just and salutary measure. (2)

The Constitution as originally drafted did not provide for direct election of Senators. Untilthe Seventeenth Amendment was ratified in 1913, Senators were selected by state legislatures.

Court Interpretations Generally

The Supreme Court in United States v. Munoz-Flores (3) affirmed that "'revenue billsare those that levy taxes in the strict sense of the word, and are not bills for other purposes whichmay incidentally create revenue.'" (4) The Court added that it has interpreted this general rule to meanthat a statute which creates a particular governmental program and raises revenue to support thatprogram, and not the government generally, is not subject to the Origination Clause. (5)

Applying this rule, the Court held that a provision of the Victims of Crime Act of 1984,section 3013 of title 18 of the United States Code, which mandates that persons who are convictedof federal crimes should pay special assessments, was not a revenue provision covered by theOrigination Clause and, consequently, that the Senate constitutionally could originate it. (6) Although amounts collectedin excess of an annual cap were deposited in the general fund of the Treasury, the Court upheld theconstitutionality of the provision because most of these assessments were deposited in the CrimeVictims Fund to compensate and assist victims of crime.

The Court said that its conclusion was consistent with its earlier decisions which held thata statute which imposed an assessment to be used to create a currency and a statute which levied aproperty tax in the District of Columbia to support railroad projects were not subject to theOrigination Clause because they raised revenue for specific programs as distinguished from generalsupport of the government. (7)

In the Munoz-Flores case, the Court appears to have clarified some issues that had beenraised in other Origination Clause cases. The Court held that an Origination Clause challenge of a statute is not a political question that should be settled only by the political branches and notappropriate for judicial resolution, i.e., it is justiciable. Although the Court in earlier cases implicitlyrejected this assertion by virtue of reviewing these challenges, the Court in the Munoz-Flores caseexpressly affirmed that Origination Clause challenges are justiciable and explained the reason forrejecting it.

The United States argued that courts should decline to hear Origination Clause challengesbecause the House possesses the power to protect its institutional interests by refusing to pass a billif it believes that the Clause has been violated. The Court responded:

Although the House certainly can refuse to passa bill because it violates the Origination Clause, that ability does not absolve this Court of itsresponsibility to consider constitutional challenges to congressional enactments. . . . Nor do theHouse's incentives to safeguard its origination prerogative obviate the need for judicial review. . .. In short, the fact that one institution of government has mechanisms available to guard againstincursions into its power does not require that the judiciary remove itself from the controversy bylabeling the issue a political question. (8)

The six member Court majority did not accept a theory espoused by Justice Stevens in aconcurring opinion joined by Justice O'Connor. Justice Stevens expressed the view that a bill whichoriginated unconstitutionally nevertheless may become an enforceable law and should be upheld ifit is passed by both Houses of Congress and signed by the President. To support this view he notedthat the Clause does not specify what consequence should follow from an improper origination. (9) The majority responded thatto survive Supreme Court scrutiny, a law must comply with all relevant constitutional limits. "Alaw passed in violation of the Origination Clause would thus be no more immune from judicialscrutiny because it was passed by both Houses and signed by the President than would be a lawpassed in violation of the First Amendment." (10)

The Court majority also appears to have rejected a view expressed by Justice Scalia in anopinion concurring in the judgment of the Court. (11) Justice Scalia argued that courts should apply what has beentermed the "enrolled bill rule" in which they rely on the designation of origin, such as H.R.for a House bill or S. for a Senate bill, that Congress chooses to give to an enrolled billrather than undertake an independent inquiry into which chamber originated a particularprovision. (12) In thiscase, although the Senate originated the special assessment provision, it appeared in a House jointresolution with the designation H.J.Res. If the Supreme Court had applied the enrolled billrule, the issue of where the provision originated would not have arisen; the Court would have presumed that it had originated in the House. Instead, the Court either looked behind the designationor accepted statements by the parties that the Senate had originated the provision before addressingthe merits of the case.

The Court did not accept an assertion raised by Mr. Munoz-Flores that any bill whichprovides for collecting funds is a revenue bill within the meaning of the Origination Clause unlessit is designed to benefit the persons from whom the funds are collected. The Court said that someof its earlier cases, Twin City Bank v. Nebeker and Millard v. Roberts , did not state that a bill mustbenefit the payor to avoid classification as a revenue bill. Consequently, in those cases thebeneficiaries of a bill were not relevant. (13) Observing that the case before it involved special assessmentsimposed on persons convicted of crime to be used to compensate and assist victims of crime, theCourt said that, "A different case might be presented if the program funded were entirely unrelatedto the persons paying for the program . . . . Whether a bill would be 'for raising revenue' where theconnection between the payor and program is more attenuated is not now before us." (14)

Court Interpretations of the Senate's Power to Amend Revenue Legislation

As noted above, the text of the Origination Clause provides that all bills for raising revenuemust originate in the House, ". . . but the Senate may propose or concur with amendments as on otherbills." The Supreme Court and lower courts have heard some cases that questioned whether Senate amendments were within the scope of the Senate's power under the Origination Clause to amendrevenue bills. These cases have held that the Origination Clause authorizes the Senate to attach an amendment to raise revenue to a House bill that raises revenue, but not to one that does not raise it. In Flint v. Stone Tracy Co. (15) the Supreme Court held that a Senate amendment which removedan inheritance tax that originated in the House and replaced it with a corporation tax did notcontravene the Origination Clause. The Court said that, "The bill having properly originated in theHouse, we perceive no reason in the constitutional provision relied upon why it may not be amendedin the Senate in the manner which it was in this case. The amendment was germane to thesubject-matter of the bill and not beyond the power of the Senate to propose." (16)

In Rainey v. United States (17) the Court rejected an assertion that a provision of a tariff actwhich imposed an excise tax on use of foreign-built pleasure yachts was invalid under the Clausebecause it had been proposed by the Senate as an amendment to a tariff bill that originated in theHouse of Representatives. The Court quoted with approval the following language from the lowercourt: "I am also satisfied that the section in question is not void as a bill for raising revenueoriginating in the Senate and not in the House of Representatives. It appears that the section wasproposed by the Senate as an amendment to a bill for raising revenue which originated in the House. That is sufficient." (18)

Lower courts also have considered challenges to a Senate amendment on the ground thatit violated the Origination Clause. In 1982 Congress enacted the Tax Equity and FiscalResponsibility Act (TEFRA), P.L. 97-248 , 96 Stat. 324. As introduced in the House, the billthat eventually was enacted as TEFRA would have reduced total tax revenues by $1 billionbetween 1982 and 1986. (19) The Senate replaced the entire text of the House bill exceptfor the enacting clause with a version that, as ultimately enacted, increased total revenue byabout $100 billion between 1983 and 1985. (20)

In over 50 cases, (21) none of which was reviewed by the United States SupremeCourt, plaintiffs challenged the constitutionality of TEFRA, contending that the Senateexceeded its authority under the Origination Clause to amend a House bill for raising revenuewhen it struck the entire text of a House bill to reduce revenue and replaced it with a Senateamendment that increased revenue. Under their interpretation of the Clause, the Senate wasrestricted in its authority to amend House bills; it could amend only House bills that increased revenue, not those that related to or collected revenue but did not increase it.

The U.S. Court of Appeals for the Ninth Circuit rejected this contention and elaboratedon the reasons.

We cannot accept this restrictive andstrained reading of the Origination Clause. The term "bills for raising revenue" does not referonly to laws increasing taxes, but instead refers in general to all laws relating to taxes. Wardell v. United States , 757 F.2d 203, 205 (8th Cir. 1985) (per curiam): Black's Law Dictionary (Rev.5th ed. 1979) (defining "raise" in the revenue context to mean "to collect, to levy, as to raisemoney by levying taxes"), see also , 2 A. Hinds, Precedents of the House of Representatives ofthe United States Â§ 1489 at 949-53 (1907) (recounting an 1872 debate between the House andSenate concerning the proper interpretation of the OriginationClause).

Under Armstrong's interpretation, bills oramendments raising taxes would have to originate in the House, whereas bills or amendments lowering taxes could presumably be initiated in either the Senate or House. This interpretationraises several problems. First, it runs sharply contrary to past practice, since the Senate hasnever regarded itself as being empowered to initiate any sort of revenue bill, even one thatlowers taxes. See, e.g. , 2 A. Hinds Precedents of the House Â§ 1489 at 949-53. Second, it maywell be impossible to implement, since members of Congress may differ over whether aproposed revenue bill or amendment will "increase" or "decrease" taxes overall, and since thesame revenue bill may have varying effects upon the total taxes assessed in different years. Finally, Armstrong's interpretation would negate or sharply restrict the application of the finalphrase of the Origination Clause, which authorizes the Senate to "propose or concur withamendments as on other bills ," since it would prohibit the Senate from proposing amendmentsto revenue bills if their effect would be to transform revenue proposals lowering taxes intomeasures raising taxes. The Senate is not constrained from proposing amendments on any othertypes of legislation based upon the effect those amendments would have; it would beinconsistent and therefore contrary to the wording of the Origination Clause to limit the Senate'sflexibility to a greater extent in the revenue context.

We therefore reject Armstrong's proposedinterpretation of the Origination Clause, and conclude instead that in adopting that clause, theframers of the Constitution intended that all legislation relating to taxes (and not just bills raising taxes) must be initiated in the House. . . . However, we also conclude that once arevenue bill has been initiated in the House, the Senate is fully empowered to proposeamendments, even if their effect will be to transform a proposal lowering taxes into one raisingtaxes. We therefore conclude that the Senate did not exceed its authority under the OriginationClause when it proposed the extensive amendment that ultimately became TEFRA. (22)

In reaching its conclusion, the Court of Appeals for the Ninth Circuit added that it joinedcourts in other judicial circuits that had rejected the contention of the plaintiffs (23) and that its decisionwas "strongly influenced, if not controlled, by the Supreme Court's decision in Flint v. StoneTracy Co. , 220 U.S. 107 (1911)." (24) The court noted that the Supreme Court in the Flint caseheld that the Senate did not violate the Origination Clause when it deleted an inheritance taxthat the House had proposed and substituted a corporate tax as a Senate amendment. The lowercourt also said that, "The [Supreme] Court was not swayed by the fact that the amended tax planincreased taxes for corporations or that it might raise total taxes to a greater extent than theproposed House bill." (25)

In the portion of its opinion quoted above, the court cited a section from Precedents ofthe House of Representatives . This section reprinted the following language from an 1872Senate committee report that addressed the meaning of the phrase "raising revenue" as used inthe Origination Clause.

Suppose the existing law lays a duty of 50per cent upon iron. A bill repealing such law, and providing that after a certain day the dutyupon iron shall be only 40 per cent, is still a bill for raising revenue because that is the end incontemplation. Less revenue will be raised than under the former law, still it is intended to raiserevenue, and such a bill could not constitutionally originate in the Senate, nor could suchprovisions be ingrafted, by way of amendment upon any House bill which did not provide forraising -- that is, collecting -- revenue. (26)

Conclusion

This report has discussed opinions of the United States Supreme Court and some lowerfederal courts that have elucidated the meaning of the Origination Clause of the Constitutionand delineated the scope of the Senate's power to amend revenue legislation. The Clauseprovides that, "All bills for raising revenue shall originate in the House of Representatives; butthe Senate may propose or concur with amendments as on other bills." The framers of theConstitution believed that Members of the House of Representatives, who are elected directlyby the people for terms of two years, should have the power to originate bills to raise revenue,but that the Senate should be able to amend them as on other bills. Until the SeventeenthAmendment was ratified in 1913, Senators, who serve six year terms, were not elected directlyby the people; they were selected by state legislatures.

The Supreme Court and lower courts have interpreted "bills for raising revenue" to applyonly to those that raise revenue to support the government generally and not to those thatincidentally may raise revenue to fund specific programs. They have held that the Senate doesnot violate the Origination Clause when it originates a bill to raise revenue for a specificprogram even if a portion of the proceeds is deposited in the general fund of the Treasury. Moreover, the Senate does not contravene the Clause when it amends a House bill for raisingrevenue under this restrictive interpretation with Senate text that raises revenue. These courtsalso have concluded that the Origination Clause denies the Senate power to amend a House billthat does not raise revenue with Senate text that raises revenue.

Some lower courts have expressly interpreted the phrase "bills for raising revenue" --which must originate in the House and which the Senate may amend -- to encompass not onlyHouse bills that increase revenue, but also those that relate to or collect revenue. Consequently,they have held that Senate does not violate the Origination Clause if it amends a House bill toreduce revenue with Senate text to increase revenue. The Supreme Court does not appearexpressly to have addressed this issue, but it has upheld the constitutionality of a Senateamendment that raised more revenue than the House bill which it amended.