Members Urge House to Determine if Carbon Trading Scheme is a Tax

 

Sensenbrenner: House, Not Senate, Must Start Revenue Bills

Washington, D.C.,  - Several House Republican leaders today urged the House Judiciary Committee to examine whether legislative proposals to create a carbon trading scheme should be treated like a tax bill and follow the proper Constitutional path through Congress.

“I call this idea ‘cap-and-tax’ because it will take money out of the private sector and transfer it to the government,” said U.S. Rep. Jim Sensenbrenner, R-Wis., ranking Republican on the House Select Committee on Energy Independence and Global Warming. “Any way you look at it, a carbon trading system is a tax, and Congress has to be careful because courts could determine these bills to be revenue bills.”

House Republican Whip Eric Cantor, Va., Ways and Means Committee Ranking Republican Dave Camp, Mich., Judiciary Committee Ranking Republican Lamar Smith, Texas, and Budget Committee Ranking Republican Paul Ryan, Wis., all joined Sensenbrenner in signing the letter addressed to House Judiciary Chairman John Conyers, D-Mich., and Constitution, Civil Rights and Civil Liberties Subcommittee Chairman Jerrold Nadler, D-.N.Y.

“The Constitution requires that bills to raise revenue for the government must originate in the House of Representatives,” said Judiciary Committee Ranking Republican Smith.  “The Founders correctly decided that issues regarding taxes must first be considered by ‘the People’s House’ to help ensure the views of constituents will be considered from the very beginning of any process that might lead to raising taxes. Because ‘cap-and-tax’ programs effectively instate a ‘tax’ or monetary fee for companies exceeding their emissions allotments, the question can be raised, are these revenue raising bills? The House Judiciary Committee should ensure that any proposal to impose fees on energy follows the procedures required by the Constitution.”

The letter said these proposals will ultimately establish a tax on carbon emissions and could therefore be considered revenue bills, which the U.S. Constitution requires to originate in the House of Representatives. Sensenbrenner is the Constitution, Civil Rights and Civil Liberties Subcommittee’s ranking Republican.

“Avoiding the word ‘tax’ has obvious political advantages for proponents of ‘cap-and-tax’ legislation,” the letter said. “If Congress passes ‘cap-and-tax’ legislation, and courts determine that the legislation is a revenue bill under the U.S. Constitution, the courts could overturn the bill if Congress has not handled it appropriately.”

The members urged the House Judiciary Committee to hold hearings to examine whether or not “cap-and-tax” legislation meets the Constitution’s definition of a revenue bill.

The letter follows:

February 11, 2009

Dear Chairmen Conyers and Nadler:

The most popular legislative proposals to combat climate change involve establishing a new government bureaucracy known as Cap and Trade.  These programs should be called “Cap and Tax” because their ultimate effect will be to establish a Federal tax on carbon emissions. 

Avoiding the word “tax” has obvious political advantages for proponents of Cap and Tax legislation.  But legally, the bill’s function, not its title, will dictate its treatment.  If Congress passes Cap and Tax legislation, and courts determine that the legislation is a Revenue Bill under the U.S. Constitution, the courts could overturn the bill if Congress has not handled it appropriately. 

Section 7 clause 1 of the U.S. Constitution requires that “All Bills for raising Revenue shall originate in the House of Representatives.”  This requirement is important.  As James Madison argued in the Federalist No. 58, the House is more accountable to the people than the Senate and should have the primary role in raising revenue.  Madison wrote, “This power over the purse may, in fact, be regarded as the most complete and effectual weapon with which any Constitution can arm the immediate representatives of the people.”  The Federalist No. 58, p. 359 (C. Rossiter ed. 1961).  At its core, the purpose of the Origination Clause is to protect individual rights.  Id.; see also United States v. Munoz-Flores, 495 U.S. 385, 395 (1990).

In United States v. Munoz-Flores, the Supreme Court found that Revenue Bills that do not originate in the House of Representatives should be invalidated:

“In the case of Bills for raising Revenue, § 7 [of the U.S. Constitution] requires that they originate in the House before they can be properly passed by the two Houses and presented to the President.  . . . The principle that the courts will strike down a law when Congress has passed it in violation of such a command has been well settled for almost two centuries.”  

Munoz-Flores, 495 U.S. at 398 (internal quotes omitted).

Whether courts will consider Cap and Tax legislation to be revenue bills will depend on the specifics of the legislation.  “Revenue Bills are those that levy taxes in the strict sense of the word, and are not bills for other purposes which may incidentally create revenue.”  Twin City Bank v. Nebeker, 167 U.S. 196, 202 (1897).

Regardless of the ultimate judicial disposition of these questions, they raise legal issues that the Judiciary Committee should examine.  I encourage you to hold hearings examining the applicability of the Origination Clause to current and likely proposals for Cap and Tax legislation. 

Sincerely,

F. James Sensenbrenner, Jr.

Ranking Member

House Select Committee on Energy Independence & Global Warming

Eric Cantor

Minority Whip

Lamar Smith

Ranking Member

House Committee on the Judiciary

Dave Camp

Ranking Member

House Committee on Ways & Means

Paul Ryan

Ranking Member

House Committee on the Budget

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