Order Code 98-471 GOV
Updated June 13, 2003
CRS Report for Congress
Received through the CRS Web
Revenue Legislation in
the Congressional Budget Process
Bill Heniff Jr.
Analyst in American National Government
Government and Finance Division
Most of the laws establishing the federal government’s revenue sources are
permanent and continue year after year without any additional legislative action.
Congress, however, typically enacts revenue legislation, changing some portion of the
existing tax system, every year. Revenue legislation may include changes to individual
and corporate income taxes, social insurance taxes, excise taxes, or tariffs and duties.
Congressional consideration of revenue legislation is governed by various constitutional
provisions and procedural rules. For more information on budget process, see
[http://www.crs.gov/products/guides/guidehome.shtml].
Article I, Section 8 of the U.S. Constitution provides Congress with the power “to
lay and collect taxes, duties, imposts and excises.” The 16th Amendment gave Congress
the power to levy an income tax. Section 7 of Article I requires that all revenue
legislation originate in the House of Representatives, but the Senate has considerable
latitude to amend a revenue bill received from the House.
Revenue legislation is under the jurisdiction of the House Ways and Means
Committee and the Senate Finance Committee. In the House, Rule XXI, clause 5(a)
protects the Ways and Means Committee’s jurisdiction by barring other committees from
reporting revenue measures. However, other legislative committees may report legislation
authorizing other types of collections.
Revenue legislation is not automatically considered in the congressional budget
process on an annual basis. Frequently, however, the President proposes and Congress
considers changes in the rates of taxation or the distribution of the tax burden. An initial
step in the congressional budget process is the publication of revenue estimates of the
President's budget by the Congressional Budget Office (CBO). These revenue estimates
usually differ from the President's since they are based on different economic and
technical assumptions (e.g., growth of the economy and change in the inflation rate).
Cost estimates of any congressional revenue proposals are prepared by CBO, based
on revenue estimates made by the Joint Committee on Taxation (JCT), and are published
in committee reports or in the Congressional Record. In addition, clause 3(h)(2) of House
Rule XIII, adopted at the beginning of the 108th Congress, requires a “macroeconomic
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impact analysis” by the JCT of any Ways and Means Committee-reported bill or joint
resolution that proposes to amend the Internal Revenue Code of 1986. Such an analysis
may be included in the committee report accompanying the measure or printed in the
Congressional Record prior to the measure’s consideration on the House floor. The
requirement also may be met by including in the committee report a statement from the
JCT explaining why such an analysis is “not calculable.”
The budget resolution includes baseline estimates of federal government revenues
based on the continuation of existing laws and any proposed policy changes. The budget
resolution may include reconciliation instructions directing the House Ways and Means
and Senate Finance Committees to report revenue legislation to meet the recommended
level of federal government revenues. Revenue legislation also may originate under the
normal legislative process, initiated by the revenue committees or individual members.
Section 303 of the Congressional Budget Act (CBA) of 1974 (P.L. 93-344) prohibits
revenue legislation from being considered before a budget resolution has been adopted.
In the House, this rule may be waived by a “special rule” reported by the Rules
Committee and adopted by the House. Typically in the case of minor changes to the tax
system, revenue legislation may be considered under suspension of the rules or unanimous
consent. In the Senate, the rule may be waived by unanimous consent or a majority vote.
When revenue legislation is considered, its content is restricted under the rules of the
congressional budget process. First, Section 311 of the CBA prohibits consideration of
revenue legislation that would cause revenues to fall below the agreed upon levels for the
first fiscal year or the total for all fiscal years set forth in the budget resolution. A point
of order may be raised in either chamber against legislation that would violate this
restriction. In the House, the point of order may be waived by a “special rule” reported
by the Rules Committee and adopted by the House. In the Senate, a motion to waive the
point of order requires a three-fifths vote of all Senators duly chosen and sworn (60 votes,
if there are no vacancies).
Second, the Senate’s “pay-as-you-go,” or PAYGO, rule (Section 505 of H.Con.Res.
95, the FY2004 budget resolution) generally prohibits the consideration of revenue
legislation that is projected to increase (or cause) an on-budget deficit in any one of three
time periods: the first year, the first 5 years, and the second 5 years, covered by the most
recently adopted budget resolution. Any reduction in revenues resulting from such
legislation must be offset by an equivalent amount of direct spending cuts, tax increases,
or a combination of the two. Without an offset, such legislation would require the
approval of at least 60 Senators to waive the rule and be considered on the Senate floor.
However, under the rule in its current form, legislation implementing the revenue policy
changes assumed in the FY2004 budget resolution is exempt from the rule, even though
it might be projected to increase (or cause) an on-budget deficit.
At the beginning of the 104th Congress, two provisions regulating the consideration
of any revenue legislation modifying federal income tax rates were added to the House
Rules. Clause 5(b) of Rule XXI requires three-fifths of the members voting to pass a
federal income tax rate increase. Clause 5(c) of the same rule prohibits any measure with
a retroactive federal income tax rate increase from being considered on the House floor.

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