Formal Tax Legislation Definition

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Formal Tax Legislation Definition

What Is Formal Tax Legislation?

The process through which a proposed tax regulation or tax reform becomes law in the United States is known as formal tax legislation. Formal tax legislation follows a set of stages outlined in the United States Constitution. The legislation, like other federal laws, needs the approval of both houses of Congress, the Senate and the House of Representatives, as well as the president.

Understanding Formal Tax Legislation

Before becoming law, the proposed tax laws begin the official tax legislative process as a bill. The tax measure must be presented in the House of Representatives because, unlike the Senate, the House is designed to represent individual residents rather than whole states. The official tax legislation process consists of the following steps:

  1. The House of Representatives drafts the tax bill, which is then forwarded to the Ways and Means Committee. The proposed tax code is prepared once committee members achieve an agreement on the proposal.
  2. The tax measure will be debated, amended, and approved by the whole House.
  3. The tax measure is sent to the Senate for consideration. Before it is submitted to the entire Senate, the Finance Committee may alter the plan.
  4. Following Senate ratification, the tax measure is submitted to a joint committee of House and Senate lawmakers to hammer out a solution.
  5. The compromise version is now being considered by the House and Senate.
  6. Once passed by Congress, the measure is delivered to the president, who will either sign it into law or veto it. If the measure is signed by the President, the appropriate agencies, such as the Treasury Department and the Internal Revenue Service (IRS), must take steps to carry it out. If he or she chooses to veto the measure, he or she sends it to the House with a statement explaining why he or she opposes different provisions of the law.
  7. If the President vetoes the tax measure, Congress may either make the adjustments the President desires or override the veto with a two-thirds majority in each house; if successful, the tax bill becomes law without the President’s signature.
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Presidents may, and often do, advocate modifications to existing tax rules, but only Congress has the authority to enact any changes.

Citizens may have an impact on tax laws through contacting members of Congress and elected officials, attending town or county meetings, engaging in lobbying activities, circulating and signing petitions, and voting for certain candidates. Citizens use this informal procedure to affect the result of the official tax legislation process by communicating their concerns to politicians.

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