If It's A Tax, What About the Origination Clause? (9/14/12)

One of our first topics in my Federal Tax Procedure class is the roles of the various players -- Congress, the Executive Branch and the Courts (OK, the grand jury as well).  And, one of the first topics it the Origination Clause.  The Origination Clause is Section 7, Clause 1, of the Constitution which says:

All Bills for raising Revenue shall originate in the House of Representatives; but the Senate may propose or concur with Amendments as on other Bills

Wikipedia, here,  provides this background on the Origination Clause (footnotes omitted):

This establishes the method for making Acts of Congress. Accordingly, any bill may originate in either House of Congress, except for a revenue bill, which may originate only in the House of Representatives. In practice, the Senate can simply circumvent this requirement by substituting the text of any bill previously passed by the House with the text of a revenue bill.  When the Senate sends an appropriation bill to the House, the House may return it to the Senate with a blue slip, thereby settling the question in practice. Either House may amend any bill, including revenue and appropriation bills. 

The Origination Clause stemmed from an English parliamentary convention that all money bills must have their first reading in the House of Commons. It was intended to ensure that the "power of the purse" lies with the legislative body responsible to the people. The clause was also part of a compromise between small and large states. The latter were unhappy with equal representation in the Senate.

The Volokh Conspiracy has this discussion of the Origination Clause as a new line of attack on the "tax" as pronounced by the Supreme Court for the individual mandate in the Affordable Care Act.  Randy Barnett, New Obamacare Challenge: The Origination Clause (The Volokh Conspiracy 9/13/12), here.  Here are excerpts of the press release related to the new attack.

Pacific Legal Foundation continues to be on the front lines in the constitutional challenge to the Patient Protection and Affordable Care Act. In a new complaint filed yesterday on behalf of client Matt Sissel, PLF attorneys have asked Judge Beryl Howell to rule that Congress ignored the Constitution’s Origination Clause when it enacted the Obamacare “tax.” We’ve also asked the court to declare the Individual Mandate unconstitutional under the Commerce Clause—thereby clarifying whether Chief Justice John Roberts’ opinion is binding precedent, or merely non-binding “dicta,” as some lawyers have argued. 

The Origination Clause requires “all bills for raising revenue” to “originate” in the House of Representatives. But the Obama Administration’s health care law did not originate in the House; it originated in the Senate, when Senator Harry Reid “amended” a bill the House had passed by striking out all of its text and replacing it with the Senate-written bill that eventually became Obamacare. At that time, Congress claimed that the bill was not a tax—and indeed, the Obama Administration continues to insist that it is not a tax—but this summer the Supreme Court issued a 5-4 decision ruling that while Congress had no power to force people to buy health insurance, it did have power to tax them for not buying insurance. The justices did not address the question of whether such a “tax” was constitutional under the Origination Clause, because none of the lawyers raised that issue—until now. 

The founding fathers wrote the Origination Clause because they were deeply suspicious of government’s power to tax. Knowing how liable it was to be abused, they wanted that power kept as close to the voters as possible. The Senate—which at the time was not even elected by the people at all—could not be trusted with a power that could, in the words of one of the Constitution’s detractors, “light upon the head of every person in the United States,” shouting “Give! Give!” Conscious of such concerns, the founders provided that all bills for raising revenue would have to originate in the House most responsive to the voters. 

Congress ignored this rule when it passed what became the Patient Protection and Affordable Care Act. As we explain further in this litigation backgrounder, the Senate used a “shell bill” procedure instead, scooping out the entire contents of a bill the House had passed, and replacing it with language the Senate had concocted. (Of course, they had to do this, since Congress was struggling to get the bill passed before anyone had time to read it.) 

* * * * 

In addition to the Origination Clause argument, our new complaint asks the court to explain what parts of Chief Justice John Roberts’ June 28 opinion are binding precedent and which are not. Legal scholars—and the Ninth Circuit Court of Appeals, in a recent opinion—have expressed confusion about what parts of the decision qualify as law, and what parts are simply Chief Justice Roberts’ personal views, or what lawyers call “obiter dictum.” We’ve asked the judge to declare that Roberts’ ruling about the Individual Mandate—that it exceeds Congress’ authority under the Commerce Clause—is indeed the law of the land, since it was joined by four other justices. 

Since June, the Obama Administration has been spinning the Supreme Court’s decision as if it had won the case and upheld the Individual Mandate. In fact, that did not happen. Five justices declared the Individual Mandate—the provision forcing Americans to buy insurance whether they want to or not—to be unconstitutional. Chief Justice Roberts went on to declare that Congress could impose a tax penalty on people who failed to buy insurance—but only because that penalty was relatively modest. If it became severe enough to be essentially the same as a Mandate, Roberts explained, he would have to find that unconstitutional as well. And, of course, such a tax would have to satisfy other constitutional requirements, including the Origination Clause, to be valid. 

Contrary to what the Obama Administration and its allies have claimed, the government did not win the Obamacare case. Nor is the battle over. PLF’s defense of the Constitution has only just begun.

Oh, well, spinning by all sides of the arguments.  I thought that, for balance, I would offer this article from a practical scholar long before this debate heated up:  Michael W. Evans, “A Source of Frequent and Obstinate Altercations”: The History and Application of the Origination Clause, 105 Tax Notes 1215 (Nov. 29, 2004), here.  Mr. Evans' Conclusions are (footnotes omitted):

Concluding Observations 

After thinking about the Origination Clause over several years, from both a historical and a practical perspective, I would like to offer several concluding observations. 

A starting point is how important the framers considered the Origination Clause. It was not some minor technical provision adopted with little debate. To the contrary, it was a critical element of the legislative balance between the House and Senate; it was debated over the course of virtually the entire Constitutional Convention, voted on repeatedly, and subject to several compromise revisions. 

In light of how important the framers considered the Origination Clause, it is surprising how uncertain they left the final version. Under the compromise, two critical terms were undefined. One was the universe of "bills for raising revenue" to which the clause applied. The other was the scope of the Senate's power "to alter or amend, as on other bills," the impact of which depended entirely on how the Senate subsequently defined the general power to amend.
As those and related decisions unfolded, several issues have been resolved, which establish some bedrock points on which we can rely. 

First, the Origination Clause is enforceable not only by Congress but also by the courts.
Second, broad agreement exists on several basic limits. The Senate may not pass and send to the House a revenue bill or add a revenue amendment to a House bill that is not a revenue bill. Conversely, the House may not add a revenue amendment to a Senate bill. 

Third, the Origination Clause does not inhibit the Senate's own internal proceedings. There was some uncertainty in the early years of Congress, and the classical model is for the Senate to do its primary work on revenue legislation in the form of amendments to a House revenue bill. However, the Senate may, if it chooses, initiate and work on revenue bills, both in the Finance Committee and on the Senate floor, as long as it does not send them to the House until it has received and amended a House revenue bill. 

Fourth, the Senate has virtually unlimited power to amend House revenue bills, although the House may not have fully conceded the point and could conceivably revive a version of its 1872 position that Senate amendments must relate to the House bill. 

In contrast, several other issues remain unresolved. The most important is the definition of a bill for raising revenue. Clearly, the Origination Clause applies to all revenue bills, including bills that reduce as well as increase revenue. But less clear is what constitutes a revenue bill, with particular uncertainty for appropriations bills and bills related to debt limit, nontariff aspects of trade policy, and the administration of tax laws; and to bills implicating the distinction between taxes and user fees. 

In light of all this, how important does the Origination Clause remain? Has it lived up to the framers' expectation? Or has it become something of a constitutional anachronism, serving primarily as a minor speed bump along the legislative highway? 

On one hand, the Origination Clause has turned out to give less primacy to the House than its strongest advocates among the framers must have envisioned. The Senate's broad power to amend, and its ability to initiate and develop revenue legislation short of sending it to the House, has allowed the Senate to frequently play a role on revenue legislation that differs little from the role that it plays on other legislation, when the role of the Senate is fully equal to that of the House. 

On the other hand, the Origination Clause continues to have a significant effect on revenue legislation, in at least three ways. 

First, it establishes a norm -- the classical model -- in which the Congress takes a careful, predictable, sequential approach to revenue legislation: the House Ways and Means Committee holds hearings and reports a bill to the full House; the Senate refers the bill to the Finance Committee, which holds further hearings, amends the House bill, and reports the amended bill to the full Senate for further debate and amendment; and finally there is a conference to resolve the differences. Adherence to that classical model is not mandatory and, indeed, may be more the exception than the rule. But the model persists and sometimes is employed on tax bills of particular importance, such as the 1986 Tax Reform Act. 

Second, even when the classical model is not followed, the Origination Clause enhances the power of the House relative to the Senate. The House has its hand on the spigot--unless the House begins the process by passing a revenue bill, the Senate cannot respond. Further, as Prof. Adrian Vermeule recently wrote, looking at the Origination Clause from the perspective of political game theory, "the House might enjoy an intangible but real form of first-mover advantage from its ability to set the policy agenda in ways that structure both legislative and political debates."

Third, within the House and Senate themselves, the Origination Clause strengthens the hand of the tax committees. That is especially true in the Senate, where the committee with jurisdiction usually has relatively little control over floor amendments. A House revenue bill ordinarily is referred to the Senate Finance Committee, which then decides whether and when to report the bill to the full Senate. Because the Origination Clause prevents revenue amendments from being offered as amendments to nonrevenue bills (whether original Senate bills or House bills that are not revenue bills), the committee with jurisdiction -- the Finance Committee -- has more control over the pace and scope of the consideration of revenue legislation by the full Senate than is the case with other legislation. 

Pulling all of this together, the Origination Clause has indeed been, as James Madison predicted in 1789, "a source of frequent and obstinate altercations." But it also remains an important part of our constitutional structure. Despite its development in ways the framers could not have envisioned, and despite the uncertainties of its application at the margins, the Origination Clause has established a model for the consideration of revenue legislation, enhanced the power of the House relative to the Senate, and strengthened the hand of the congressional tax committees.

I previously blogged on the Supreme Court case:  When Is A Tax Not a Tax? When the Supremes Says It Is Or Not! (8/2/12), here.