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Writing and Enacting Tax Legislation


Tax laws greatly affect our economy. This is because the amount of revenue raised through taxes largely decides the amount of services that the government can afford to provide.

The Congress takes steps known as the legislative process to pass a Federal law. This process begins when a Senator or Representative prepares a proposed law, called a "bill." It ends when Congress approves the bill and sends it to the President. When the President signs the bill, it then becomes law.

The Constitution says that "all bills for raising revenue shall originate in the House of Representatives" and that "Congress shall have the power to lay and collect taxes." Presidents can, and frequently do, recommend changes to current tax laws, but only Congress can make the changes.

Executive Branch Preparation

Most recommendations for new tax legislation come from the President. Many people are involved in shaping these recommendations. Months of preparation may go into new proposed legislation before the President makes his recommendations to Congress. The Treasury Department has primary responsibility for drafting the President's tax recommendations. Advice and assistance also come from other government agencies, such as the Internal Revenue Service (IRS) or people in business or professional fields.

Once drafted, the Treasury Department sends the legislation to the White House for review by the President and his advisors. The President may direct the Treasury Department to make changes to the legislation or to remove or add some provisions. Then, the Treasury Department makes the changes and provides the President with any additional information he requests. Next, the President sends a message to the Congress as he formally submits the proposed legislation.

The President may send tax proposals to Congress any time. In practice, however, the President will propose only one major tax bill each year. He often mentions his tax proposals in his annual State of the Union address. In addition, the President will also discuss any proposed tax legislation in the Economic Report of the President, which goes to the Congress every January. Usually, the President sends proposed tax legislation to Congress during the first few months of the year.

Congressional Tax Legislation

Under the United States Constitution, all legislation concerning taxes must "originate" in the House of Representatives. The House usually must take action on the legislation before the Senate can begin its consideration.

Committee on Ways and Means

Legislation begins its trip through the Congress in the House Ways and Means Committee, which is responsible for considering all tax legislation. Thus, it is among the most powerful Congressional Committees. Tax legislation is so important that most Committee members must serve in the House for many years before they get appointed to the Ways and Means.

The Ways and Means Committee schedules hearings so that people can testify on the proposal. The Secretary of the Treasury is the first to speak. Other Administration officials, such as the Director of the Office of Management and Budget, may follow. Committee members also hear testimony from representatives of private interest groups. These witnesses answer questions from Committee members on how the proposal will affect the economy and specific groups. During this period, many people seeking changes in the bill will privately contact the members of the Ways and Means Committee. This is one force that helps sway the opinion of members.

When Committee concludes its hearings, the Committee members meet in executive session. At this time, the proposal is "marked up." These markup sessions are usually informal and are concerned with revising the proposals. Committee staff members, along with staffs of the Treasury Department and the Congressional Joint Committee on Internal Revenue, may provide information, advice, and assistance. These sessions are open to the public and many observers are present, from both the news media and interest groups. The Administration sends representatives to watch and to advise Committee members.

As the Committee reaches tentative decisions on the proposals, they draft them into legislative language. It also prepares a detailed report on the proposed Legislation. The report can be longer than the bill itself, and presents the Committee's reasons for recommending the bill. The Internal Revenue Service and the courts may use this Committee report as an interpretation of the legislation. Once the bill and the report are completed, they get introduced in the House of Representatives for consideration.

Senate Finance Committee

Like the House Ways and means Committee, the Senate Finance Committee is very powerful and prestigious. It is responsible for all Senate legislation dealing with tax matters.

This Committee begins its formal work on the legislation after the House has passed its version of the bill. It holds hearings similar to those held earlier by the House Ways and Means Committee. Instead of considering the tax proposals made by the Administration, however, it considers the bill passed by the House. Witnesses appear at the Committee hearings in the same order as in the Ways and Means Committee. They direct their testimony to the House version of the bill.

After the hearings are finished, the Committee marks up the House bill, similar to the markup by the Ways and Means Committee. When the Committee completes its markup, the bill is usually very different from the one passed by the House. It then gets reported to the full Senate for floor action. A report gets filed along with the bill. The report explains in detail the amendments made by the Finance Committee.

The entire Senate debates the bill as reported by the Committee. During the debate, the Senators may further amend the bill before they bring it to a vote. Normally, the legislation does not get considered again if the Senate fails to pass the bill.

If the Senate passes the House version of the bill, without amendments, it gets sent directly to the President. Usually, however, the Senate passes its amended version of the House bill. Then, there is further Congressional action required. This is because there are now two versions of the bill -- the bill passed by the House and the House bill as amended and passed by the Senate.

The bill with the Senate amendments gets returned to the House of Representatives. Next, the House usually adopts a motion to disagree with the Senate amendments. A Conference Committee then gets appointed to adjust the differences between the two versions of the bill.

Conference Committee Action

Conference Committee members get appointed by the Speaker of the House and the President of the Senate. Each chamber votes as a unit. Members of the majority party control each unit. Representatives of the Administration and interest groups again try to have the Conferees support or oppose aspects of the bill.

The Conference Committee reports its version back to both the House and Senate, which then vote on the Committee's compromise version. If it gets adopted, the revised bill gets sent to the White House.

Executive Brance Action

Before the President decides to sign or veto a tax bill, he receives advice from the Secretary of the Treasury on the bill's provisions.

The President also solicits comments from other Federal agencies and then makes a final decision. If he decides to veto the bill, he returns it to the House along with a statement of why he opposes various portions of the bill. The House must then attempt to override the veto, or make those changes that the President wants.

If the President signs the bill, the responsible agencies must take action to carry out the bill. Officials in the Treasury Department issue regulations, while the Internal Revenue Service develops tax forms and instruction booklets for taxpayers.

Influencing Congress

Under the Constitution, the American public has the right to a representative form of government. Members of Congress and the President must be elected to office. They must win reelection for another term to continue serving the public.

The First Amendment to the Constitution grants citizens the right to "petition the government for a redress of grievances." Citizens may act on their own behalf, as individuals, or organize into groups for influencing government officials.

Citizens may make their views known to those who represent them in Congress. They do this by writing letters or by visiting elected officials' offices in their district or State. They may also contribute time or money to a candidate's campaign, vote in the primaries and general elections, and join groups that share their ideas.

Pressure groups that get formed to achieve a certain goal often strongly influence Members of Congress. Most, known as "special interest" groups, are concerned only with a narrow set of issues. There are also "public interest groups" that are concerned with issues that affect the public at large, not just their own members.

Pressure groups use many tactics to achieve their goals. They attempt to influence the voting public through paid advertising, public speaking, and direct mail campaigns. By swaying public opinion, they hope to influence indirectly the actions of Congress or officials in the Executive Branch. These groups also attempt to influence members of Congress more directly. Also, they organize letter-writing campaigns and contribute time and money to help get candidates elected. These groups also present members of Congress with proposed legislation, supply background information or statistics to support their viewpoints, and testify at Congressional hearings. Many groups have an office in Washington for these activities.

"Lobbying" is the name of the practice they use to influence the course of legislation, and developed many years ago. This was because people waited in the lobbies outside the House and Senate chambers, hoping to speak with the lawmakers as they entered or left. Today, lobbying is an accepted part of the legislative process. Members of Congress often view lobbyists as useful sources of information and political support. They see the pressure groups that lobbyists represent as a valuable tool for citizens to present their views before members of Congress.

Last Updated: 12/5/2010 10:28 AM