Question

A client has recently learned of a proposed tax bill that would increase the tax rates on investment gains by 5 percent. The president does not support this increase. Please describe for your client the process by which new tax legislation is created and how the president's disapproval may influence the enactment of the bill.

Answer 1

Tax Legislation Process

The tax bill is initiated in the House of Representatives and referred to the Ways and Means Committee. When members of this committee reach agreement about the legislation, they write a proposed law.

The bill goes to the full House, where it is debated, possibly amended, and eventually approved.

The bill goes to the Senate, where it is reviewed and often rewritten by the Finance Committee. The committee's version is then presented to the full Senate.

After the Senate approves the bill, it is sent to a joint committee of House and Senate members, who try to arrive at a compromise version.

The compromise version of the bill is sent to both the House and the Senate for approval.

After Congress passes the bill, it goes to the president, who can either sign it into law or veto it.

If the president vetoes the bill, Congress may try to override the veto with a two-thirds vote of each house.

The power of the President to refuse to approve a bill or joint resolution and thus prevent its enactment into law is the veto. This veto can be overridden only by a two-thirds vote in both the Senate and the House. If this occurs, the bill becomes law over the President's objections.