How are Federal Tax Laws Created?

When we hear the word “taxes” there are often a variety of feelings attached and none of them are that pleasant.  It is good to really understand the “why” behind taxes and how tax laws are passed so we can alleviate some of that pain.

The House of Representatives

Just like a business, government has to have revenue in order to pay its debts and incoming expenses on things such as military expenses or foreign aid.  The part of government that deals with the introduction of all tax bills is the House of Representatives.  All of the Bills are drafted and reviewed by legislative committees.
House of Representatives

The Bill

The bill is studied out and sent to subcommittees and consulting agencies.  These committees hold hearings about the details of the bill in order to decide on possible amendments or corrections.  The committee then prepares a report in which it explains the purpose behind the bill, proposed amendments, who it will affect, and arguments for its adoption.  After the report is finished it is sort of in limbo waiting to be acted on.  If bills are not acted upon they can be sent to the house again for consideration.  If they pass they are sent to the Clerk of the House where the bills are renumbered and filed along with the report.

The Act

The bill is then scheduled to appear for debate on the first reading.  Then there is a second reading where there are specific amendments that are debated on.  The last appearance is for the voting of the bill as a whole where there is a majority of the house needed for its adoption.   Once a bill passes with a majority vote it is sent to the senate for consideration.  It goes through a very similar process as before except it is analyzed by tax legislation and finance study committees. Once it passes through them it is sent for the President’s signature and then becomes official as a law.

With this intense process, we can see that bills are analyzed thoroughly before becoming law.  This makes the amendment process often slow and arduous but establishes a number of checks and balances to protect citizens.

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