A Tax Limitation Constitutional Amendment: Issues and Options Concerning a Super-Majority Requirement

A Tax Limitation Constitutional Amendment: Issues and Options Concerning a Super-Majority Requirement

Order Code 98-368 GOV
Updated July 15, 2003
CRS Report for Congress
Received through the CRS Web
A Tax Limitation Constitutional Amendment:
Issues and Options Concerning a
Super-Majority Requirement
James V. Saturno
Specialist on the Congress
Government and Finance Division
Summary
Proposals to limit the federal government’s authority to raise taxes have been made
several times in recent years. Most frequently, these proposals call for limits on
Congress’s ability to pass revenue measures. Typically, limitation proposals would
allow increases in tax revenues only under one of two circumstances. First, tax revenues
could increase under existing tax laws as a result of economic upturns. Alternatively,
they could increase because of a new law, but only if it were passed by a super-majority
(typically two-thirds or three-fifths). Questions about how such proposals might be
applied in practice have not been clearly answered. Congress has previously considered
such proposals in 1996, 1997, 1998, 1999, 2000, and 2001. In each case the proposal
has failed to achieve the two-thirds majority necessary for passage.
Most recently, the House considered H.J.Res. 96 on June 12, 2002. The measure
failed to achieve the necessary two-thirds, 227-178. This report will be updated to
reflect any further legislative actions on such proposals.
Introduction
In recent years, there have been a number of proposals to place limits on the federal
government’s authority to raise taxes. Some proposals would hold total revenues to a set
percentage of some economic indicator, such as gross domestic product (GDP) or gross
national product (GNP), while others would limit increases in taxes to a percentage of the
growth of a particular economic indicator (such as national income). The term “tax
limitation” is also used to describe legislative proposals that would limit Congress’s
ability to consider revenue measures, regardless of their effect on the level or growth of
tax revenues, by requiring a super-majority (typically two-thirds or three-fifths) for their
passage. This type of limitation would allow increases in taxes only under one of two
circumstances. First, tax revenues could increase under existing tax laws as a result of
Congressional Research Service ˜ The Library of Congress

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economic upturns. Alternatively, they could increase because of a new law, but only if
it were passed by a super-majority.1
Such proposals have often been associated with proposed balanced budget
constitutional amendments.2 This association is based on the idea that a tax limitation
provision is needed so that Congress would be less likely to raise taxes rather than cut
spending in order to produce a required balanced budget. For example, the Senate
Judiciary Committee has twice reported proposed balanced budget amendments that
included a provision limiting increases in receipts to a rate not greater than “the rate of
increase in national income” (S.J.Res. 5, 98th Congress, S.Rept. 98-628, and S.J.Res. 13,
99th Congress, S.Rept. 99-162). Neither proposal received floor consideration. Proposals
to limit the level or rate of growth of revenues were considered on the House floor in
conjunction with consideration of proposed balanced budget amendments in the 101st,
102nd, and 103rd Congresses. The first floor consideration of a freestanding proposal to
limit congressional consideration of tax legislation occurred in the 104th Congress.
Legislative History
Action in the 107th Congress. On June 6, 2002, H.J.Res. 96 was introduced by
Representative Pete Sessions, along with 150 cosponsors, and referred to the House
Judiciary Committee. As introduced, H.J.Res. 96 contains the following provisions:
Section 1. Any bill, resolution, or other legislative measure changing the internal
revenue laws shall require for final adoption in each House the concurrence of two-
thirds of the Members of that House voting and present, unless that bill, resolution,
or other legislative measure is determined at the time of adoption, in a reasonable
manner prescribed by law, not to increase the internal revenue by more than a de
minimis amount. For purposes of determining any increase in the internal revenue
under this section, there shall be excluded any increase resulting from the lowering
of an effective rate of any tax. On any vote for which the concurrence of two-thirds
is required under this article, the yeas and nays of the Members of either House shall
be entered on the Journal of that House.
Section 2.
The Congress may waive the requirements of this article when a
declaration of war is in effect. The Congress may also waive this article when the
United States is engaged in military conflict which causes an imminent and serious
threat to national security and is so declared by a joint resolution, adopted by a
majority of the whole number of each House, which becomes law. Any increase in
the internal revenue enacted under such a waiver shall be effective for not longer than
two years.
1 There have also been proposals to require that measures to increase revenues pass by a majority
of the total membership of each house rather than a majority of Members voting, a quorum being
present (as is typically required) as well as proposals that would require a rollcall vote but these
are not discussed in this report.
2 For more on the legislative history of proposed balanced budget amendments, see CRS Report
97-379, A Balanced Budget Constitutional Amendment: Background and Congressional Options,
by James V. Saturno.

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On June 12, 2002, the proposal was considered by the House under the terms of
H.Res. 439, a special rule providing for its consideration. H.Res. 439 provided for 2
hours of general debate, and one additional hour of debate on an amendment if offered by
the minority leader (or his designee), although no amendment was offered. On final
passage, H.J.Res. 96 failed to achieve the necessary two-thirds, 227-178.3
Previously, Representative Sessions introduced H.J.Res. 41 on March 22, 2001.
That measure was referred to the House Judiciary Committee and subsequently reported
on April 20, 2001 (H.Rept. 107-43). On April 25, 2001, the proposal was considered by
the House under the terms of H.Res. 118, a special rule providing for its consideration.
H.Res. 118 provided for 2 hours of general debate, and one additional hour of debate on
an amendment if offered by the minority leader (or his designee), although no amendment
was offered. On final passage, H.J.Res. 41 failed to achieve the necessary two-thirds,
232-189.4
Action in the 106th Congress.
In the 106th Congress, the House of
Representatives considered proposals for a tax limitation constitutional amendment in
both sessions. On March 11, 1999, Representative Barton introduced H.J.Res. 37, a
proposal similar in most respects to those voted on in the 105th Congress. H.J.Res. 37 was
deliberated in the House on April 15, 1999, under the terms of H.Res. 139, a special rule
providing for its consideration. H.Res. 139 provided for 3 hours of general debate, and
one additional hour of debate on an amendment if offered by the minority leader (or his
designee), although no amendment was offered. On final passage, H.J.Res. 37 failed to
achieve the necessary two-thirds, 229-199.5
On April 6, 2000, Representative Pete Sessions introduced H.J.Res. 94. The
measure was deliberated in the House on April 12, 2000, under the terms of H.Res. 471,
a special rule providing for its consideration. H.Res. 471 provided for 2 hours of general
debate, and one additional hour of debate on an amendment if offered by the minority
leader (or his designee), although no amendment was offered. H.J.Res. 94 failed to
achieve the necessary two-thirds, 234-192.6
Action in the 105th Congress.
In the 105th Congress, the House of
Representatives considered proposals for a tax limitation constitutional amendment in
both sessions. On March 11, 1997, Representative Joe Barton introduced H.J.Res. 62.
The measure was referred to the House Judiciary Committee, and a hearing was held by
the Subcommittee on the Constitution on March 18. H.J.Res. 62 was reported on April
10, 1997 (H.Rept. 105-50), and considered by the House on April 15, 1997, under the
terms of H.Res. 113, a special rule providing for its consideration. This special rule
allowed 3 hours of debate and provided for the self-executing adoption of an amendment
to clarify the application of H.J.Res. 62 by adding language stating that “For the purposes
of determining any increase in the internal revenue under this section, there shall be
3 See vote no. 225 in the Congressional Record, daily edition, vol. 148, June 12, 2002, p. H3480.
4 See vote no. 87 in the Congressional Record, daily edition, vol. 147, Apr. 25, 2001, p. H1582.
5 See vote no. 90 in the Congressional Record, daily edition, vol. 145, Apr. 15, 1999, p. H2097.
6 See vote no. 119 in the Congressional Record, daily edition, vol. 146, Apr. 12, 2000, p. H2146.

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excluded any increase resulting from the lowering of an effective rate of any tax.” As thus
amended, the measure failed to achieve the necessary two-thirds majority, 233-190.7
On February 28, 1998, Representative Joe Barton again introduced a proposed tax
limitation amendment (H.J.Res. 111). This measure was subsequently modified and
deliberated under the terms of H.Res. 407, a special rule for its consideration that was
adopted on April 22, 1998. H.Res. 407 provided for 3 hours of general debate and one
additional hour of debate on an amendment if offered by the minority leader (or his
designee), although no amendment was offered. As amended, H.J.Res. 111 failed to
achieve the necessary two-thirds, 238-186.8
Action in the104th Congress. The first floor consideration of a proposal to limit
congressional consideration of tax legislation occurred in the 104th Congress.
On
February 1, 1996, Representative Joe Barton introduced H.J.Res. 159. The measure was
referred to the Judiciary Committee and a hearing was held by the Subcommittee on the
Constitution on March 6, 1996. On April 15, 1996, the joint resolution was considered
by the House under the terms of H.Res. 395. On final passage, the measure failed to
achieve the necessary two-thirds, 243-177.9
Issues and Options
At the beginning of the 104th Congress, the House adopted a new provision in its
rules, now in Rule XXI, clause 5(b), to limit certain increases in federal income tax rates.
This rule was subsequently modified at the beginning of the 105th Congress.10 Some tax
limitations advocates, however, argue that House Rule XXI, clause 5(b) is not sufficient,
and that a permanent, broad-based limitation needs to be imposed by the Constitution.
They argue that whereas House rules must be readopted every 2 years, a constitutional
amendment is much more difficult to change. Further, they assert that a tax limitation
would benefit the U.S. economy, and that states with tax limitations have a comparative
advantage in terms of economic growth over states without such limitations.
Advocates of a tax limitation amendment point to polls that suggest the public
supports the idea of making it difficult for the federal government to raise taxes.
However, opponents argue that a super-majority requirement would be anti-democratic,
and should not be imposed. In addition, they point out that although several states operate
with various types of tax limitations, it is not clear that these would be directly applicable
to the federal government. Further, they suggest that significant questions remain about
the language of proposed tax limitation constitutional amendments, and how it might be
interpreted, either by Congress or the Courts, and point to difficulties in applying House
Rule XXI, clause 5(b) in the 104th Congress.
The term “revenue” appears in this context in Article I, section 7 of the Constitution,
the so-called Origination Clause. As interpreted by the Supreme Court, the phrase “all
7 See vote no. 78 in the Congressional Record, daily edition, vol. 143, Apr. 15, 1997, p. H1506.
8 See vote no. 102 in the Congressional Record, daily edition, vol. 144, Apr. 22, 1998, p. H2170.
9 See vote no. 243 in the Congressional Record, daily edition, vol. 142, Apr. 15, 1996, p. H3304.
10 For more on this rule, see CRS Report RL31197, Revenue Measures in Congress: Procedural
Considerations, by James V. Saturno.

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bills raising revenue” has typically meant measures raising revenue to support government
generally, but not necessarily measures that raise funds to support specific governmental
programs.11 This constitutional understanding of the term “revenue” may therefore differ
from “internal revenue” as intended in recent limitation proposals.
Relatedly, not all types of receipts to the federal government are currently treated
alike in the budget process. Collections from the public based on the government’s
exercise of its sovereign powers are generally treated as revenues (e.g., personal income
taxes). Collections by the government from business or market-oriented activities are
generally treated as offsets to outlays (e.g., various royalties and licensing fees). These
offsetting collections are sometimes applied against the outlays of a specific agency or
program and sometimes against the outlays of the government generally.
In an effort to clarify the application of a super-majority requirement, the terms
“internal revenue” and “internal revenue laws” have sometimes been used. As with
House Rule XXI, these terms are intended to limit the application of proposed
amendments to legislation concerning explicit changes in tax laws, rather than all
legislation effecting revenues, however, these terms have not been subject to rigorous
interpretation by the courts. Therefore, how the application of such a limitation might be
interpreted remains unclear. It is possible that a limitation on tax increases could apply
only to measures that raise money for the general fund of the federal government, but not
to some funds raised for specific programs or for some types of fees paid to the federal
government or government entities. For example, at one time President Clinton proposed
that fees be imposed by the Federal Deposit Insurance Corporation (FDIC) and the
Federal Reserve for the examination of both FDIC-insured banks and bank holding
companies. It is not clear whether such fees, tied to a particular, closely related service,
might be regarded as revenues for the purposes of this type of limitation amendment.
Conversely, the phrase “increasing revenue,” as used in these proposals could be
interpreted to apply these requirements broadly to a wide variety of measures. Such a
provision might apply not only to measures that would increase revenues by increasing
the rate of taxation, but also to measures that would increase revenues by lowering the
rate of taxation while increasing either the taxable base or the volume of taxable activity,
or both. Broadly interpreted, such a provision could have an impact on a large portion of
the legislation considered by Congress. Legislation that has the direct or indirect effect
of stimulating economic (hence taxable) activity and thereby increasing revenues might
be covered by a tax limitation provision. For most recent proposals the question of rate
increases versus revenue increases is not resolved, although revenue increased resulting
from lowered rates were specifically excluded from the application of H.J.Res. 37 and
H.J.Res. 94 (106th Congress).
11 Justice Joseph V. Story, in Commentaries on the Constitution of the United States (Boston:
Hilliard, Gray & Co., 1833; reprint edition Littleton, CO: Fred B. Rothman & Co., 1991) vol.
2, chap. XIII, sec. 877, p. 343, wrote that only bills to raise taxes in the strict sense of the word
are “bills for raising revenue”; and that bills for other purposes, which may incidentally create
revenue, are not included. This principle has been upheld by the Supreme Court in several
instances (for example, Twin City Bank v. Nebeker 167 U.S. 196 (1897), Millard v. Roberts 202
U.S. 429 (1906), and, more recently, United States v. Munoz-Flores 495 U.S. 385 (1990)). For
more on the interpretation of the term revenue, see CRS Report RL31399, The Origination
Clause of the U.S. Constitution: Interpretation and Enforcement, by James V. Saturno.

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To overcome some of the imprecision in such definitions, several proponents have
tried to develop language that focuses more on the terms of the measures than on their
effect on revenues. During the 104th Congress, one such proposal would have required
“Any bill to levy a new tax or increase the rate or base of any tax may pass only by a two-
thirds majority of the whole number of each House of Congress” (H.J.Res. 159, S.J.Res.
49). Similarly, the focus of H.J.Res. 62 (105th Congress) and H.J.Res. 37 (106th Congress)
was partly on the form of a measure rather than on its effect. Each proposal specifies that
it would apply to measures “changing internal revenue laws,” although it qualifies that
phrase by excluding measures whose effect would not be to increase internal revenue by
more than a de minimis amount.12 The language in H.J.Res. 94 (106th Congress), and
H.J.Res. 41 (107th Congress) takes this one step further by specifying the super-majority
requirement would not apply to any legislation projected to produce increased revenue as
a result of “lowering of an effective rate.”
Again, the language is such that some interpretation would be required to fulfill the
measure’s mandate. For example, President Clinton proposed limiting deferrals of gains
associated with exchanges of like-kind property used in a trade or business or for
investment to only those exchanges located within the United States. Would this
narrowing of the provision to exclude exchanges of property located outside the United
States be seen as a change in the taxable base and therefore subject the proposal to a
super-majority requirement? Also, would the extension of a tax due to expire be seen as
a new tax and thus require two-thirds to pass?
However, proposals in this vein generally focus on the effect of revenue legislation.
For example, one typical proposal “Prohibits a bill to increase receipts from becoming law
unless approved by a three-fifths majority in each House” (S.J.Res. 12, 105th Congress).
It is not clear whether a limitation on increasing revenues could also be applied to
measures which increase tax rates to a level intended to inhibit an activity (e.g., a possible
increase in taxes on tobacco products) and thus lower taxes collected. The intended effect
in such a case may be a reduction in revenues, due to the inhibitory effect of making
something cost more, rather than an increase in revenues due to the higher rate. The
question remains as to how a limitation amendment would be applied to such a provision:
so that the long-term intended effect of such a measure would exempt it from the
restrictions of a tax limitation provision by offsetting any temporary upsurge in revenues
due to the increased rate, or so that the short-term revenue increase would be sufficient
to require the measure to be passed by a super-majority.
In the above example, questions concerning the rate at which revenues would
decrease, and possibly when, could make revenue estimates a critical, and controversial,
factor in determining the applicability of a tax limitation constitutional amendment. Who
would make such estimates (possibly the Joint Tax Committee, the Congressional Budget
Office, the Treasury Department, or the Office of Management and Budget)? Relatedly,
would estimates focus on revenues generated in the next fiscal year or some longer
period? In addition, the reliability of estimates, already a significant factor in the
budgeting of federal expenditures, would likely be at issue.
12 The phrase “more than a de minimis amount,” is generally understood to mean more 0.1% of
federal revenues.