Lieberman-Warner: Just How Unconstitutional?

Jonathan Adler, a law professor at Case Western Reserve University in Ohio who teaches environmental law, took a look at the question we’ve posed here and here. We can agree that $902 billion qualifies as substantial revenue, then does not the Constitution require the bill to originate in the House?

Adler, posting at the Volokh Conspiracy:

A key issue in setting up any cap-and-trade is how to allocate the credits. One way is to “grandfather” existing firms, and allocate credits in proportion to current or past emissions. Another way (typically favored by economists) is to auction off the credits. This is one of the ways credits will be allocated under S. 3036. Specifically, carbon allowances will be auctioned off and the government will use the proceeds to invest in low-carbon technologies and attempt to offset energy price increases caused by the imposition of a carbon cap.

If enacted, S.3036 would generate substantial revenue for the federal government. This prompts a question from a reader: Why, then, is this not a “Bill for raising revenue” under Article I, section 7 of the Constitution (the “Origination Clause”), which requires that such bills “originate” in the House of Representatives? Good question, I thought. I don’t teach this issue in my Constitutional Law class, and I’m a bit rusty on legislative procedure.

A super-quick (and superficial) web search reveals an answer: Bills that are primarily for other, non-revenue-generating purposes, that have the incidental effect of raising revenue, don’t count. So, for example, under United States v. Munoz-Flores, a bill imposing a “special assessment” on some criminals under the Victims of Crime Act of 1984 was not a “Bill for raising revenue” that needed to originate in the House. Given this holding, and the Supreme Court’s general tendency to defer to Congress on such questions, it appears that an Origination Clause challenge to a climate cap-and-trade bill that originated in the Senate would not be very fruitful. [UPDATE 5:30 p.m. — Adler accidently omitted the word “not” in his post. So we add the word “still” in the following sentence.] 

We still submit that revenue-raising is at the core of Lieberman-Warner, with the imposts serving to discourage emissions and raise the money to reward good behavior. CBO Director Peter Orszag describes the bill’s revenue impact in a post at his official blog:

CBO estimates that enacting the legislation would increase revenues by about $902 billion over the 2009-2018 period, net of income and payroll tax offsets. Over the next 10 years, we estimate that direct spending would total about $836 billion. The additional revenues from enacting this legislation would exceed the new direct spending by an estimated $66 billion, thus decreasing future deficits (or increasing surpluses) by that amount over the next 10 years. Other spending could result from enactment of the bill, but it would be subject to future appropriation action. This estimate does not address such spending. In years after 2018, net revenues attributable to the legislation would exceed annual direct spending through 2050.

That’s a revenue bill.

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