Skinner v. Mid-America Pipeline Co. - Oral Argument
Transcript:
Argument of Thomas W. Merrill
Chief Justice Rehnquist: We'll hear argument next in No. 87-2098, Samuel Skinner v. the Mic-America Pipeline Company.
Mr. Merrill?
Mr. Merrill: Thank you, Mr. Chief Justice, and may it please the Court.
This case concerns the constitutionality of a system of fees established by Congress in Section 7005 of the Consolidated Omnibus Budget Reconciliation Act of 1986.
The District Court for the Northern District of Oklahoma, adopting the report of a magistrate, held that the statute is an unconstitutional delegation of Congress' power of taxation.
The case is here on a direct appeal from that judgment.
The Appellee does not argue in its brief that Section 7005 violates the general non-delegation principles articulated... articulated by this Court in its decisions beginning with J. W. Hampton and Company v. United States and most recently in Mistretta v. United States.
Instead, Appellee argues that... that the case does not come within the terms of the ordinary delegation doctrine for two reasons.
First, Appellee contends that the power of taxation is subject to a special and highly restrictive version of the non-delegation principle.
And second, Appellee contends that the fees that were imposed by Section 7005 cannot be sustained as an exercise of any power of Congress except its power of taxation.
I'd like to turn to those two arguments in a moment, but first I think it would be useful to spend a little time looking at the... the provisions of the statute that is at issue here, Section 7005, because when we do that, I think you'll see that Congress has, in fact, given the executive very little discretion in this particular statute.
In fact, Congress itself made most of the crucial policy decisions implicated by this particular system of fees.
Congress provided in the statute quite clearly that it was to apply to only one agency, the Department of Transportation.
This is not an omnibus bill that applies to... across the board to all Federal agencies.
Congress articulated quite clearly its policy.
It wanted a system of fees established that would recover the costs that the Department of Transportation incurs in implementing two pipeline safety programs, the Natural Gas Pipeline Safety Act and the Hazardous Liquids Pipeline Safety Act.
Subsection D of Section 7005 imposes a precise ceiling on the total amount of fees that can be collected in any given year.
It cannot exceed 105 percent of the annual appropriations established by Congress for both of these pipeline programs.
In Subsection C of the statute, Congress adopts another limitation providing that the fees can be used only for one purpose.
They can only be used to support the agency's activities under these two pipeline programs and not for any other purpose.
Subsection A(3) and Subsection D of the Act both specify exactly who is to pay these fees.
They are to be paid by all natural gas pipeline transmission companies and by all liquid... hazardous liquid pipeline companies.
And finally, the only area of the statute that really provides for any degree of discretion at all is the section that sets forth how the fees are to be established, and that's Subsection A(1) of Section 7005.
And if we look at that section carefully, you will see that Congress, in fact, adopted no less than four constraints on the exercise of discretion by the Department of Transportation in setting the fee schedule.
First of all, if the statute is read carefully, you will see that it adopts a single principle that the Department of Transportation is to follow in establishing fees.
Fees are to be based on pipeline usage.
Secondly--
Unknown Speaker: Mr. Merrill, you keeping referring the... to these charges as fees.
I guess one of the things argued by the other side is that it's a tax not a fee.
Mr. Merrill: --That's correct, Your Honor.
Unknown Speaker: And I must say there is language in National Cable Television and other cases that would indicate that fees are imposed on identifiable beneficiaries for particular benefits.
And this looks very much like a tax.
I guess your argument doesn't require us to determine that it's a fee and not a tax, but--
Mr. Merrill: Well, as I... I mentioned--
Unknown Speaker: --I find it difficult to look at this as anything but a tax.
Mr. Merrill: --As I mentioned very briefly, the Appellees really have to sustain two propositions in order to win here, and if they don't sustain on... sustain both propositions, they lose.
The first is that Congress is subject to some special restriction on delegation under the taxing power, and the second is that this system of fees could only be justified as an exercise of the taxing power and not as an exercise of the commerce power.
Unknown Speaker: Well, you refer... you continue to refer to it as a system of fees.
But traditionally fees have been imposed on people who get some benefit from... the user fee.
You know, you go to a national park.
You camp overnight.
You get something out of it.
Here these people aren't asking for safety controls.
They're subject to the safety controls.
Mr. Merrill: That's true, Your Honor.
Recall, however, the Constitution doesn't use the word "fees" and we're talking about an issue of constitutional law.
The issue of... the second issue of constitutional law presented we think is whether or not Congress had to be acting under the taxing power or whether it could be acting some... under some other power such as the commerce power.
Now, it's true that the word "fee" traditionally has a connotation of something like a user fee or some exaction in return for a benefit.
That's what the independent Offices Appropriations Act is about, and that's what this Court had before it in the National Cable Television case and in the New England Power case.
But if you think about the Commerce Clause and what Congress can do under the Commerce Clause, I don't think it be... can be contended that the only thing Congress can enact is a fee in that technical sense of... of some charge imposed in return for a benefit.
Congress passes statutes containing civil penalties, criminal fines.
Unknown Speaker: Can it enact a tax under the Commerce Clause?
Mr. Merrill: I don't think that Congress could enact a... a pure tax under the Commerce Clause.
Unknown Speaker: Why would it ever need to?
I mean, if it's enacting a tax, why doesn't it proceed under the power to levy taxes?
Mr. Merrill: The truth is I think, Justice Rehnquist, that Congress doesn't specify what clause of the Constitution it's proceeding under when it adopts these sorts of things.
And I think one of our points would be that... that this Court should not force Congress to do that and should not force courts to do that by articulating a different delegation standard that would apply depending on which power Congress is, in fact, operating under.
That's one of the reasons why we think it doesn't make sense to say that there are two radically different standards of delegation and which one you apply would depend on which power of Congress we determined Congress to be acting under.
Unknown Speaker: Well, then you should have no hesitancy in referring to these exactions as taxes.
Mr. Merrill: Well, I refer to them as fees because Congress referred to them as fees.
Unknown Speaker: That's what the statute--
Mr. Merrill: That's what the statute says.
Unknown Speaker: --says.
Well, don't we at least have to know whether they are taxes in order to determine whether the bill properly originated in the house?
Did this bill originate in the House?
Mr. Merrill: This bill did originate in the House, Justice Scalia, but no claim has been raised in this case under the Origination Clause.
The Appellee--
Unknown Speaker: But I'm saying there... there is at least that constitutional reason to have to determine whether Congress was proceeding under the taxing power or under the Commerce Clause.
Mr. Merrill: --Yes.
There... there may be reasons that arise in the Constitution that require the Court to determine what a tax is, although the cases I believe under the Origination Clause have been very reluctant to define with any precision exactly what a tax is.
All I'm saying is that in this case I don't think the Court has to come up with some constitutional definition of what a fee is.
The Constitution doesn't use the word "fee".
The Constitution grants Congress broad power under the Commerce Clause.
xxx.
Unknown Speaker: Of course, the Origination Clause doesn't use the word "tax" either.
It's a bill for raising revenue.
Mr. Merrill: Revenue.
That's correct.
Unknown Speaker: Yes.
And the question I suppose is... one of the preliminary questions is whether this is a bill for raising revenue or not.
Mr. Merrill: That could potentially be a question.
Unknown Speaker: And you submit it is not I gather.
Mr. Merrill: The word "revenue" conceivably could have a different scope than the word "tax".
I understand, for example, that the House traditionally argued that revenue included appropriations as well as taxing bills.
The Senate disagreed with that.
So, there's... there are a lot of untested issues that could conceivably be raised by the Origination Clause.
But again, no claim has been made in this case that this particular provision violates the Origination Clause.
The Origination Clause came in through the side door in Appellee's brief in order to try to substantiate its more general argument about delegation.
Let... let me, if I can, though just... just complete noting the provisions in the statute that govern the setting of these fees because I think it is an important point.
The statute sets forth a single criterion for determining fees: pipeline usage.
It's not a multiple choice test in the sense that the Appellees suggest.
The statute does go on to set forth three factors that the agency can look at in trying to determine pipeline usage, but the ultimate standard that Congress enunciated was pipeline usage.
The statute also says that... that in... in determining pipeline usage by those factors that there must be a reasonable relationship between those factors and the determination of pipeline usage.
And finally, the statute says that in establishing the schedule, the Secretary shall take into account... take into consideration the allocation of departmental resources.
So, what we have here really is a... is by modern standards a highly precise statute, one that sets forth a number of constraints on the discretion of the Secretary of Transportation, and sets forth really four limitations on the type of... the schedule of fees that can be adopted.
I don't think that any serious claim could be made that this statute violates the intelligible principles standard of the J. W. Hampton case which this Court has most consistently applied in delegation cases.
Unknown Speaker: Mr. Merrill, do you think Congress could determine the total amount it needs each year for all government services and obligations and then tell IRS to determine a rate and figure out how to raise the money?
Mr. Merrill: That, obviously, would be a far cry from what we have before us in this particular case.
Our contention... and I... I will get to it presently is that there should be no distinction in terms of the delegation standard that this Court applies to taxes as opposed to fees.
Unknown Speaker: So, you think Congress could do that.
Mr. Merrill: If Congress set forth a standard to confine the discretion of the agency and... and indicated its policy and did so in a way that meant that the agency's actions were subject to meaningful judicial review, yes, I think Congress can do that.
That strikes us as odd.
That strikes as sort of different from the traditions that we've come to expect in the area of taxation.
Unknown Speaker: Me too.
You... me too.
You... you'd want us to review the... the... the assessment of taxes?
Mr. Merrill: Well, I don't know that I would want the Court to review it under the delegation doctrine any differently than the Court has... has reviewed other major enactments under the delegation doctrine.
I think it... it strikes us as odd under our traditions, but those traditions have not been developed under the compulsion of any holding by this Court about the meaning of the power of taxation and how far Congress has to go in... in legislating with specificity under the taxing power.
The... Congress itself is responsible for having generated that tradition, and there's no reason to think at this point that Congress is about to abdicate or to give away that... that power which it has rather jealously protected over the years.
Unknown Speaker: Well--
Mr. Merrill: Certainly nothing in this statute suggests that Congress is about ready to abdicate in its... in its powers.
Unknown Speaker: --One can say that all other delegations of... of authority can be... can be connected to some executive activity.
And you can say it's really just giving the executive discretion with respect to the performance of some distinctively executive activity.
Whereas taxation is... is so... so utterly independent of the performance of any executive duties.
Well, Congress gives the Internal Revenue Service discretion in implementing the tax codes.
There's a great deal of discretion exercised there.
In interpreting the... the tax code, but not--
Mr. Merrill: And in promulgating regulations, including legislative regulations in some circumstances.
Unknown Speaker: --But not fixing rates.
Mr. Merrill: Generally, yes.
Congress does not tell the IRS to fix rates.
But I don't think that fixing rates can somehow be singled out or zeroed in on as... as a... as a... as a unique function as to which there can be absolutely no delegation by Congress whatsoever.
After all, fixing rates was exactly what was at issue in the J. W. Hampton case.
Unknown Speaker: Nor does Congress tell IRS how much money to raise.
Mr. Merrill: Nor does Congress tell IRS... Congress did not tell the DOT how much money to raise in this case either.
DOT can... is... has... is subject to a fixed limitation in any given year of 105 percent of its annual appropriations, and over time--
Unknown Speaker: Yes, but they're supposed to get 100 percent of their costs of operating the program, aren't they?
Isn't the... the purpose of the fee schedule to reimburse the agency for its costs of operation.
Mr. Merrill: --That's correct.
If the fee schedule works correctly, if they're not... if the collection of the fees is reasonably complete, over time the agency will recover 100 percent of its appropriated costs.
Unknown Speaker: See, if this... if this program is permissible, this is a way of raising additional revenues without increasing taxes, isn't it?
Mr. Merrill: Yes.
Unknown Speaker: Yes.
Mr. Merrill: And, in fact, the legislative history... I would have to be candid... suggests that the primary motivation for enacting the statute was concern with the Federal deficit.
But I don't think that that means it's unconstitutional as an unconstitutional delegation of power because if you look at the statute, the... the discretion is channeled quite narrowly here.
And we see no principal basis in the Constitution for a distinct delegation doctrine with respect to taxes as... as opposed to the regulation of interstate commerce.
Unknown Speaker: And user fees have the same effect too and the same attraction and are often imposed for the same reason.
Mr. Merrill: Yes.
Unknown Speaker: Instead of raising taxes, you impose user fees.
Mr. Merrill: Yes, yes.
I mean, if you look at the history of the IOAA, for example, in 1952, there's a footnote in the National Cable case which recites a little bit of that history and indicates that Congress' motivation there was to reimburse the government for some of the expenses that it was incurring in providing benefits, privileges and licenses to people.
What Congress thought here was we have an industry which is engaged in an inherently dangerous activity, transporting natural gas and oil through pipelines.
We've adopted a regulatory program, and in order to try and limit those dangers, and doesn't it makes sense that the costs of doing that should be borne by the industry?
Unknown Speaker: Well, one can certainly agree wholly with that judgment, but regret that Congress can't make up its own mind about some of these things.
Mr. Merrill: Congress made up its mind in this case.
If you... if the principle that Congress is operating under is that it wants an industry to bear the costs of a program, it seems sensible to me for Congress to direct the agency to establish the schedule of fees that is going to apportion those costs according to the degree to which each company in the industry is, in fact, creating the costs.
Congress could do it by some kind of fixed formula saying that the fees shall be X percent or something like that, but that would be more rigid and in a sense make less sense than simply telling the agency to do it.
And the agency's discretion here is not... is not broad.
They're supposed to do it according to pipeline usage.
Unknown Speaker: Well, but you speak as if rigidity were something to be scorned.
But basically, the idea of legislation and administration suggests that, you know, there is going to be some rigidity in the legislation, that it doesn't entirely just lop over to the administrator.
Mr. Merrill: I agree with that.
And in the... in the taxation area, pure and simple, when we're talking about raising revenues in order to support public goods like defense and the national welfare system, rather than recovering the costs that... that the government has incurred in a particular program, that type of... of... of rigidity and... and setting of fixed rates based on broad distributional considerations and other factors makes complete sense.
And Congress, in fact, routinely does that.
But when Congress decides that it wants to recover the costs of a particular program from the persons who are responsible for that program, for the... for the need for that program, I don't think it's inappropriate for Congress to say that... that some discretion should be given to the agency in the apportionment of those costs among the people responsible for the... giving rise to the need for the program in the first place.
Unknown Speaker: What about Congress telling an agency to raise such taxes or such funds as may be in the public interest, convenience and necessity, which is a standard we've... we've approved in other contexts?
Mr. Merrill: Well, Justice Scalia, at some point, obviously, you would start bumping up against--
Unknown Speaker: Is that the point?
Mr. Merrill: --the limitations that the Court identified in the Schechter Poultry case, for example.
I mean--
Unknown Speaker: Well, but... but that... but we've... we've approved that language in other contexts.
Is that language okay for taxes too?
Mr. Merrill: --I... our submission--
Unknown Speaker: If not, then there's a different standard for taxes.
Mr. Merrill: --Our submission is that the same standard that the Court has articulated in the non-delegation context generally should be applied to exercises of the power of taxation.
Unknown Speaker: So, your answer is yes.
You could say raise taxes or raise... raise funds to the degree and in the manner that is in the public interest, convenience and necessity.
Mr. Merrill: Well, if that's all the statute said, I think it would raise questions--
Unknown Speaker: That's all the Federal Communications Act says.
Mr. Merrill: --Well, it says more than that.
I mean, it--
Unknown Speaker: Not really.
Mr. Merrill: --That... that's a particular standard for award of licenses.
Unknown Speaker: Not really, for when broadcasting licenses are to be issued.
There's not much more.
Mr. Merrill: The standard for setting... awarding a license or setting a rate, but that standard appears within the context of a whole administrative mechanism which has been set up by Congress with general statements of purpose--
Unknown Speaker: Well, yes, but the standard that Justice Scalia suggests would also appear in the history of... history of appropriations and the agency spent a certain amount of money over the years, and that sort of... they could decide what degree of activity of their own was in the public interest.
xxx.
Mr. Merrill: --Yes.
I will admit that... that these... these... these problems are troubling, that they seem to be contrary to the traditions that we've operated under.
But I would... I would remind the Court about some of the reasons that... that the Court has cited for not applying a highly strict delegation standard in the commerce context and would suggest that those same reasons would also apply in the context of taxation.
Now, the two primary reasons I think, first of all, are just simple a practical problem that when you're operating a government the size of the Federal Government, Congress can't make all the policy decisions itself.
It has to utilize the executive branch or the... or executive agencies to decide supplementary issues of policy.
That has been a primary factor that has been cited in this Court in its cases.
The second is a definitional problem.
If you're going to draw the line between somehow fundamental policy issues and non-fundamental policy issues, how can the Court develop a workable standard for differentiating between those two types of questions.
That's... those sort of considerations have haunted the delegation doctrine in... in the context... in the traditional context.
And I think they would be equally applicable here.
Appellees say, well, it's different when we're talking about the allocation of the tax burden.
That's somehow special.
But the allocation of the tax burden is not just simply a function of tax rates.
It's a function of the definition of income.
It's the function of what's deductible.
It's the function of what kind of credits you get.
And the Internal Revenue, for example, has to exercise a lot of discretion in a lot of areas in determining those things.
And so, the ultimate allocation of a tax burden is not something that Congress itself can make every... every... every single decision about.
And so, we... we just... Appellees have not suggested really a meaningful intermediate standard for delegation that would apply to the taxation xxx, but not to the--
Unknown Speaker: How much... how much damage would be done to... to our prior history in cases if we simply held that the taxing power is non-delegable?
Mr. Merrill: --If you held that the taxing power was non-delegable?
Unknown Speaker: Yes.
Mr. Merrill: Well, I don't know what that would mean.
I mean, the taxing power is non-delegable.
The commerce power is non-delegable.
Unknown Speaker: Rules for raising revenue have to originate in the House and follow the procedure.
That's all.
Mr. Merrill: Semantically I don't think the correct reading of this Court's cases is that any of Congress' powers are delegable in the sense that the entire power can be transferred to somebody else.
The issue this raises is how much discretion can Congress give to the executive in implementing statutes that it enacts pursuant to its multiple powers.
We think in answering that question, how much discretion can you give before you have somehow deemed to have delegated or deemed to have abdicated that the Court... that the only standard we can think of... the only standard that anybody has really suggested is the standard of J. W. Hampton and Schechter Poultry and so forth.
And... and for the Court to somehow suggest that taxation is different would send us down the road of having to consider all sorts of challenges to tax statutes in a variety of contexts based on the need, first of all, to come up with an abstract definition of taxes as opposed to something else and then, secondly, to try and figure out what this new delegation standard actually means.
Appellees have identified nothing in the text of the Constitution that would differentiate the taxing power from the commerce power.
They certainly don't suggest that Article I, Section 8, Clause 1, which sets forth the power to lay and collect taxes itself, provides a textual basis.
They focused almost exclusively on the Origination Clause.
I think there are three reasons why the Origination Clause cannot plausibly be cited as a source for some kind of hyper delegation standard that applies only to taxation.
First of all, the Origination Clause doesn't say anything more about the degree of precision that Congress has to use in passing tax statutes than does Article I, Section 8, the Taxing Clause itself.
Secondly, insofar as the Origination Clause can be read as reflecting a policy judgment by the Framers that issues of taxation should remain closer to the people than other types of decisions, the Framers provided a procedural mechanism for realizing that policy.
They said that tax bills had to originate in the House.
This bill did originate in the House.
There's no dispute about that, and so the procedural mechanism that Congress adopted to vindicate its policy has been satisfied.
Finally, appellees have quoted to the Court the first half of the Origination Clause which says that
"all bills for raising revenue shall originate in the house of representatives. "
but they haven't quoted or relied on the second half of the Origination Clause which says
"but the senate may propose or concur. "
in "amendments as on other bills".
So, unlike the British tradition, for example, where the House of Commons got to initiate revenue measures and the House of Lords could only approve or disapprove, vote up or down on that, the Framers rejected that and gave the Senate the power to amend or propose alternative measures even though the bills are originated by the House.
This is a much more diluted principle of popular accountability than one would have under the British system or that one would have if all you had was the first half of the Origination Clause.
And we don't understand how you get from that diluted principle of accountability, how you make the logical leap from that to the proposition that Congress can give the executive no discretion in implementing the tax laws.
There seems to be too much of a... of a gulf there in order to sustain the proposition the Appellee wants to sustain.
Let me turn to the second--
Unknown Speaker: I'm not... I'm not sure I... I followed all of that argument of--
Mr. Merrill: --Well--
Unknown Speaker: --It doesn't... it doesn't apply to the delegation doctrine.
The delegation doctrine, we see if the legislature is delegating its powers.
Mr. Merrill: --The Appellees have argued, Justice Kennedy, that you can find this policy in the Origination Clause that says that matters of taxes have to be kept close to the people.
The House of Representatives at the time the Constitution was framed was directly elected, but the Senate was not.
And so, Appellees concluded from that matters of tax have to be decided by what today are... are both the House and the elected Senate to a greater extent than can be decided by an executive branch agency which is only--
Unknown Speaker: We still have to identify a revenue bill and we still have... we still have to identify a revenue bill and we still have to make sure that it originates in the House.
Mr. Merrill: --The Origination Clause, of course, still applies.
They're not... and they're not disputing that it was violated in this case.
They're trying to find this policy in it.
And all I'm suggesting is--
Unknown Speaker: And you're not saying it has no policy reason.
Mr. Merrill: --No.
All I'm suggesting is that if there is a policy of popular accountability, It's not the dramatic one they suggest.
It's a qualified one because the Senate, at the time the Constitution was adopted, was not directly elected and that the Framers contemplated that the Senate would have the power to propose amendments to revenue bills which, of course, today the Senate is directly elected by the people, and so we have perhaps more accountability than the Framers even anticipated under the Origination Clause.
Let me make just one quick point about the second issue: Is this a tax or is this a fee?
I don't think that's the correct way to ask the question.
The correct way to ask the question is could Congress adopt this provision under its commerce power.
And I think if you think quickly about two hypothetical... or two statutes, you can see my point that Congress ought to be able to have the power under the Commerce Clause to enact this particular statute.
One statute would impose strict liability on all pipelines for accidents caused by the pipeline... fires, explosions and so forth... and would require the pipelines to pay damages to persons that are injured.
The second statute would adopt a scheme of regulation setting the safety standards and enforcement to ensure that accidents don't happen, and then imposes on the pipelines the costs of paying for that scheme of regulation.
The second statute is really what we have in this case.
I can't see any question that the first statute would be sustainable under the commerce power, and if that's the case, I think the second ought to be sustainable under the commerce power as well.
I'd like to reserve the balance of my time for rebuttal, if I might.
Unknown Speaker: Very well, Mr. Merrill.
Mr. McMillan?
Argument of Richard McMillan, Jr.
Mr. McMillan: Mr. Chief Justice, and may it please the Court.
The issue in this case, of course, is not whether the Framers were committed to the proposition that taxation and legislative accountability for taxation were important.
That proposition, that elected representatives should be accountable for their votes on tax matters, was accepted by everyone.
The issue is whether or not that deeply held belief was actually incorporated into the text of the Constitution so that it actually binds Congress today when Congress is not so sure it likes the idea of that accountability.
The Constitution says that
"all bills for raising revenue shall originate in the house of representatives. "
And when the Constitution says "all bills", it is using in constitutional language the only word that meant law making.
You couldn't pass... you couldn't make a law without introducing a bill.
And it might be sufficient to just stop there and accept the Constitution at its word, that all revenue-making bills or laws must originate in the House of Representatives.
Unknown Speaker: Well, this one did.
Mr. McMillan: Section 7005 originated--
Unknown Speaker: Right.
Mr. McMillan: --but the decision that we're complaining about did not.
The decision that we're complaining about is setting a tax rate.
You can't have a revenue-raising bill without setting a revenue rate or a tax rate.
That decision was not made by Congress.
That decision was made in the Department of Transportation.
Unknown Speaker: Hasn't the President been given the power on some occasions to establish the... the levels of... of importation fees on oil and on other matters as well?
Isn't that... isn't that a revenue-raising measure?
Mr. McMillan: Well, if we take the Hampton case, for example, in Hampton, Congress said that they wanted a tariff equal to the difference between the cost of production at home and abroad.
And it asked, and properly asked, the executive to become involved in the implementation of that statute to determine over time what the cost of abroad--
Unknown Speaker: Right.
Mr. McMillan: --of production abroad and at home were.
But that arithmetic calculation was... was no more than that.
So, in that case, no.
There was not specific rate of duty imposed.
Unknown Speaker: Why is this one less... less arithmetic?
Because the particular individuals to pay it are not... are not as well identified?
Is that--
Mr. McMillan: No.
This case is not arithmetic because the agency was given four ways to set the tax rate.
They could choose one of four rates in effect.
They could base the rate on miles, on volume miles, on revenues or some combination.
And it makes a big difference whether you choose miles or volume miles.
Unknown Speaker: --Well, I guess in Hampton there were a lot of different ways of competing whether the goods were being subsidized abroad or whether... you know, whatever the President had to determine there.
There were probably a dozen different ways of going about making that factual inquiry.
And the President could have decided to do it in one way or another.
Mr. McMillan: There is a basic difference we think between establishing a rate of tax.
We're talking about revenue raising under the... under the Origination Clause.
We think there is a basic difference between establishing that rate of tax in the context of taxation and making determinations about findings of fact, case-by-case determinations in response to changing conditions over time.
That's what was happening in Hampton.
It was a case that involved regulation of commerce.
It involved the imposition of duties on foreign commerce as a way of regulating foreign commerce.
It did not involve the setting of tax rates for purposes of funding the Federal Government.
Unknown Speaker: Doesn't the President have... he has all sorts of powers under the Trading with the Enemy Act.
But I recall that the President has, on his own, established import... import fees on... on oil.
Hasn't... hasn't... hasn't that happened?
Mr. McMillan: I don't know.
Unknown Speaker: Do you think the President could... could be given the authority in the event of a... if he thinks the national interest requires it, to impose an import fee on... on petroleum?
Mr. McMillan: I think the President... let me give two answers to that.
First of all, I think that if the President is acting under some power other than the taxing power, under the war powers power, for example, then perhaps he could do that under that power.
Unknown Speaker: Well, here he's acting under the commerce power, but your... your argument is, yes, he may be acting under the commerce power, but this is raising revenue.
Now, the hypo I gave you... it's the same.
He's acting under the war power, under all sorts of powers, but he's raising revenue by... by imposing a... an import fee on... on oil.
What I'm suggesting is it's very hard to adopt an absolute rule that the executive cannot be given discretion as to whether to raise revenue or not.
Mr. McMillan: To me, Your honor, the rule basically boils down to whether or not it's a zero sum game.
Revenue raising... let me... let me just take the New England Power case as an illustration of that zero sum game principle, and New England Power I choose because that involved natural gas pipelines, just as this case involves natural gas pipelines.
In New England Power, there was a set of regulations.
And the government came in and made the argument that they're making today; namely, those regulations benefit these pipelines.
And the Court said fine.
If you can point to a benefit that you are conferring on a specific individual or company by your regulatory action, fine, then charge them for it.
There's a quid pro quo involved there.
Something goes this way and you pay a fee in return for it.
But it what you are doing is raising revenue for the public purpose, if you are doing something other than simply trying to make entrepreneurs rich, which was the language Justice Douglas used, and are going beyond that to satisfy a public purpose, then you are raising revenue, and when you are raising revenue, you come under constitutional concerns that are different.
I think we can take that much away from National Cable and New England Power.
What the difference is we are here today to decide.
And the first place we need to look is the Origination Clause.
We can look at the structure of that clause.
It is the first enumerated provision in Section 7 of Article I which contains not only the Origination Clause, of course, but the Presentment Clause and the principles of bicameralism.
It has words that are meaningful.
Bills were the constitutional term for law making.
And "originate" in a dictionary at least means to bring into being.
Tax law making must be brought into being through bills in the House of Representatives.
And we know from looking at the history of this clause, that it symbolized legislative accountability for tax matters.
It was part of the great compromise.
It was ardently championed by some of our most famous forbearers.
And it was a proposition not simply that the executive should not be involved in raising taxes, but that not even the Senate should play the role of originating that idea.
Unknown Speaker: But it doesn't say that the rates have to be fixed in those bills, does it?
Mr. McMillan: It... well, this Court will have to decide what a bill to raise revenue means.
If this Court thinks you can raise revenue without setting a rate, then a bill to raise revenue that said nothing about rates wouldn't be covered by the Origination Clause.
But if the notion of the Framers, if the history of this clause means anything... that is, that the basic decisions about taxes have got to be made by Congressmen... then the decision about rates is the central issue, perhaps the number one issue that you have to find in that bill before you can move past the Origination Clause and even worry about whether there are intelligible principles for doing something else.
Unknown Speaker: xxx.
What do you do about Treasury Department regulations which... which assuredly determine who will pay taxes and what rates will be for particular individuals?
Mr. McMillan: There is a--
Unknown Speaker: A lot of discretion as... as to how to write them.
Mr. McMillan: --There is a profound difference in fact between the regulations of other agencies which this Court has approved as lawmaking or quasi lawmaking and Internal Revenue regulations which, as Your Honor mentioned in Mr. Merrill's argument, are interpretive.
There is a big difference between the IRS' role which is to interpret what Congress had... had to say in a way not binding on this Court and an independent legislative sort of lawmaking function that... that we've seen with other agencies.
So, I think--
Unknown Speaker: You think... you think that's a constitutional line between interpretive regulations and... and legislative regulation.
Mr. McMillan: --I--
Unknown Speaker: So, you... you think this one would be okay if instead of what they said, Congress simply said you shall raise a reasonable amount of money assessed... by assessing... assessing these charges in a reasonable fashion.
Then the agency would have been interpreting the word "reasonable" and it would have been okay.
Mr. McMillan: --No, absolutely not.
I think--
Unknown Speaker: Well, then... then the constitutional line has nothing to do with interpretive or not.
Mr. McMillan: --No.
I believe the constitutional line does.
There is a distinction between giving the agency a lawmaking function and an interpretive function.
In the interpretive function situation, the only lawmaking body remains Congress.
And--
Unknown Speaker: That depends on... on how broad the word you're interpreting is.
I mean, in some agencies, the... the word is "reasonable".
And if that's going to satisfy you that the Constitution has been complied with, so long as you say, instead of spelling out what they spelled out here, which I think it is a lot better, if the... if the Congress had simply said, you know, impose a reasonable... reasonable fees in a reasonable fashion, then it would all be interpretive and it's all okay.
Mr. McMillan: --Let's take that hypothetical and be specific about it.
Congress passes a law that says the IRS set just and reasonable taxes.
There are two things wrong with that.
First of all, a point that I was trying to make and apparently haven't made very successfully is that the interpretive function, which is all the IRS does... the interpretive function asks Congress... I mean, asks the agency to decide what did those words mean just... what did those words mean.
That's something... that interpretation then has no law-making function and certainly couldn't rise to the level, we don't think, of establishing a rate, a rate for tax.
But even if there was... even if they said just and reasonable rates, there's a... there's a fundamental problem with whether or not Congress has made the decision.
Unknown Speaker: I agree with that.
I'm not... I'm not questioning that.
I'm just questioning whether you can say that the critical distinction is between whether it's interpretive or non-interpretive because depending upon how... how vague the word you are supposedly interpreting it is, you can... you can achieve equally undemocratic results either way.
Mr. McMillan: At a practical level, perhaps.
I... I was only trying to make the point that we're here to decide where the law-making function ought to reside for purposes of taxation.
And giving an agency interpretive power does not transfer that law-making function away from an agency.
Giving it law-making... legislative rule-making powers does.
We know why this concept of legislative accountability for taxation was so important.
We see it in the newspapers regularly.
We... we saw it in a... in a somewhat different context recently when Congress voted down the congressional and judicial pay raises.
We may not like that result, but we know why it happened.
It happened because Congress had to vote, and when Congress has to vote on an issue as sensitive as taxation, we know it's going to affect the result, and we know that's what the Framers intended.
So, we do think as a matter of the first issue that the Origination Clause is violated here, that if you look at the structure of that clause, at the words that it uses, at the history of that clause, you can only conclude that the decision made here by the Department of Transportation did not originate in a bill of the House.
It originated in a notice in the Federal Register.
There is a second issue which we have raised in the alternative to the Origination Clause issue, which posits the question of what if the Origination Clause is not by itself dispositive of whether or not some... someone other than Congress can tax.
It has to do with what we mean by the term "execution of the laws" in the context of taxation.
Let me start with a proposition that I don't think will be disputed.
The Congress cannot delegate legislative power to the President is a principle universally recognized as vital to the integrity and maintenance of the system of government ordained by the Constitution.
That quote from Field and Clark has been quoted innumerable times in decisions of this Court.
The question is does it mean anything.
Without reaching the issue of taxation, the context of taxation here, I think we can begin with the proposition that whenever this Court has sustained the delegation of law making to an agency, it has always been a predicate for that ruling, that there was something to execute.
There was some program to implement.
There were case-by-case determinations over time in response to changing conditions or whatever.
We found that in Hampton.
It was true in Mistretta.
In short, there has to be a program to execute, perhaps details to fill in with respect to that program, but not the central issue of how much someone is going to pay, not simply a decision to make.
And we know that the--
Unknown Speaker: What was that in Mistretta?
I... I don't recognize your description of what the Court said in Mistretta at all.
Mr. McMillan: --The Court in Mistretta--
Unknown Speaker: It's a good description of the dissent, but--
[Laughter]
--but I don't--
Mr. McMillan: --The--
Unknown Speaker: --What... what was the executive function that was being performed--
Mr. McMillan: --The--
Unknown Speaker: --other than the making of rules?
Mr. McMillan: --The quote from Mistretta that I was referring to was this.
"Developing proportionate penalties for hundreds of different crimes by virtually a limitless array of offenders is precisely the sort of intricate, labor-intensive task for which delegation to an expert body is especially appropriate. "
Unknown Speaker: Writing tax laws may be.
Mr. McMillan: The Department of Transportation has never been thought of as a expert agency on writing tax laws.
This... this Court in the Lichter case and in other cases has, in looking at what we mean by execution of the law and delegation, held specifically that we ought to be concerned with the nature of the power that is being invoked.
In Lichter it was a war powers situation, and the Court found that in that context, there was... it was particularly appropriate to find the delegation.
And in--
Unknown Speaker: Mr. McMillan, supposing in this case that Congress had said this safety program is costing us $100 million a year, we want the... that money raised from the pipeline companies and all of them, and we want it raised on a basis of usage of the pipelines.
Now, that may be a little bit different from this case, but it's... to the extent it is a hypothetical.
Is... is that unlawful delegation?
Mr. McMillan: --Yes.
Unknown Speaker: Why?
Mr. McMillan: It... it is really precisely the New England Power fact pattern in a sense.
It's really exactly New England Power.
Unknown Speaker: Well, but didn't the Court in New England Power say that Congress had not delegated to the FPC?
It didn't say Congress couldn't have delegated, did it?
Mr. McMillan: The Court didn't reach the third... they reached two issues and didn't reach a third.
They found this is unquestionably taxes.
They found that the label, the tax label, makes a difference for constitutional purposes, but on the third issue, what difference does it make, they didn't reach it.
We're here today to argue that the taxing power, that is, the basic decisions about raising revenue, including the most central decision of all, who was going to pay how much, cannot be delegated to an agency regardless of whether or not the standard is usage or something else that's--
Unknown Speaker: But how much... how much discretion really is delegated here if you say that there's $100 million to be raised?
We want it raised from all pipeline users.
Now, all the agency has to do is go out and count in that case.
And we want it paid... paid by them or raised from them on the basis of pipeline usage.
You could just refer to statistics.
Is the--
Mr. McMillan: --Mid-America is here not because it cares how much the industry is going to pay.
Mid-America is here because if you choose miles, as distinguished from volume miles, the tax we pay is very different.
And there is no distinction.
We talk about $100 million or $9 million.
There is no distinction between the DOT program here and the Interstate Commerce Commission or the Securities and Exchange Commission or the Federal Aviation Administration or any number of other agencies.
Unknown Speaker: --Well, that simply means we ought to get it right in this case I guess.
[Laughter]
Mr. McMillan: We... we should get it right in this case.
Absolutely.
We should expect that the financing of a major part of the Federal Government by taxes is going to be made according to a set of basic decisions made in Congress.
Unknown Speaker: Well, supposing in... in this case the Congress had added volume miles so that there really was very little discretion left in that area.
Mr. McMillan: If they had said volume miles, then we're... we wouldn't be here because that... there isn't any discretion.
That is the selection of a formula which you go out to the industry and find out what are the volume miles which... for your pipeline, what are for you.
You plug that into a pocket calculator, and out comes the number.
Unknown Speaker: Mr. McMillan, I don't... tell you the truth, I don't see what's so sacrosanct about taxes.
I mean, we have... we have an agency here, the Department of Transportation, that is allowed to adopt all sorts of rules with broad discretion, that can say what I can do or what I can't do.
They can make things unlawful.
It's authorized even to adjudicate civil penalties against me for violating those rules.
And yet, somehow we... we pass some... some threshold of impermissibility when... when they're given authority to say how much money is to be raised from... from pipelines.
I... I don't feel that I'm suddenly in a... in a new world when... when that happens.
I mean--
Mr. McMillan: Well--
Unknown Speaker: --Had we not given Transportation all these other powers, I could understand it.
But what's so... what's so ugly about taxes?
I don't understand it.
Mr. McMillan: --Well, with all due respect, Your Honor, I don't... it's not a question of whether you feel uncomfortable or I feel uncomfortable or even whether the Framers felt uncomfortable.
The question is what does the Constitution require, and there is no way of understanding the Origination Clause and where it traces from without understanding that as a symbol of legislative accountability in the tax area.
Unknown Speaker: Well, no, not legislative accountability.
House accountability.
What it says is when there is a tax bill, it has to be... originate in the House, just as in other areas it says when there is a bill on anything, it has to pass both houses and has to be presented to the President.
But neither of those two says when there has to be a bill.
It just says what must happen when there is a bill.
Mr. McMillan: It means legislative accountability and House accountability.
It means not only will the executive not be involved in this decision, but even the Senate's involvement will be limited.
That's the... that's what the Framers had in mind and that's what's--
Unknown Speaker: If that decision is to be made by... by law, as opposed to having it made by the executive.
Yes.
When that is so, it must be done that way, just as you can say in other areas, whenever the decision is to be made by law, the Senate has to agree to it and the House has to agree to it and the President has to sign it.
But that doesn't speak to whether it must be made by law or can instead be delegated to the President.
Mr. McMillan: --We are here today arguing that the decision about what Mid-America is going to pay, what its tax rate is going to be can only be made by law.
I don't think that's a particularly surprising provision.
That's what the Constitution says.
Unknown Speaker: xxx so.
I don't see anything so... so quite different about taxes as opposed to... to offenses that... that can be made unlawful by... by the President without... without a law.
Mr. McMillan: Offense... offenses are a zero sum game in the way that revenue raising isn't.
If you do something wrong, your... you pay back for it.
You... you pay to make it right, so to speak.
That's a zero sum game that comes in under a different sort of a... of a constitutional power.
When you raise revenue for the public good for discretionary spending, that is a issue that is covered by a discrete set of constitutional provisions.
There's no way to get away from the fact that the Constitution treats taxation differently than it treats other powers, not only in the Origination Clause but in other clauses.
Taxation is different under the Constitution.
Mid-America is here sharing some of the... some of those original concerns.
Tax should be called a tax.
If someone is going to decide what Mid-America is going to pay to support this program, it ought to be Congress.
It ought not to be an invisible employee of the Department of Transportation.
Unknown Speaker: May I ask?
Under your view if the Congress delegated to the Department of Transportation the decision of which roads in the Federal highway system should become toll roads and to set the right rates in an effort to reimburse the government for the cost of the roads, would that be permissible?
And they charge a user fee in the form of tolls, but the purpose of the user fee would be to pay back the government for building the roads.
And now would that be different from this?
Mr. McMillan: The Court in National Cable I think found that if you are talking about a user fee, it doesn't rise to the level of something that the constitutional concerns associated with taxation are concerned about.
Unknown Speaker: So, that would be all right.
Mr. McMillan: Yes.
Unknown Speaker: Yes.
Mr. McMillan: In closing, I would just go back to a point that I started with that the decision we are talking here originated in the Department of Transportation.
There is a difference between bills for raising revenue and notices in the Federal Register.
Thank you.
Unknown Speaker: Thank you, Mr. McMillan.
Mr. Merrill, do you have rebuttal?
You have three minutes remaining.
Rebuttal of Thomas W. Merrill
Mr. Merrill: Two quick points.
First, with respect to the argument that the DOT regulations violate the Origination Clause in this case because the regulations didn't originate in the House of Representatives, that argument would call into question the validity of every single regulation issued by the Treasury Department.
And it's simply not the case that all Treasury regulations are interpretive regulations.
One of them, which is cited in Appellee's brief at page 19, Section... under Section 1502 of the Internal Revenue Code, specifically provides authority to the Secretary to adopt legislative regulations.
And it's not true that that's some kind of esoteric housekeeping provision.
It has to do with establishing standards for allocating income and expenses among affiliated corporations when they file a consolidated return.
And those regulations and the decisions made under them have an extremely major impact on the allocation of the tax burden among affiliated corporations, how much income tax they pay and what kind of capital gains they're subject to.
And with respect to Justice Scalia's question about the President's imposing a fee on imported oil, yes, under the Trade Expansion Act in the early 1970s, the decision was made by President Ford to substitute for a system of oil import quotas a system of oil import fees.
And this Court unanimously sustained that against a non-delegation challenge in the case of FEA v. Algonquio which is at 5426 of the United States Reports.
Thank you.
Chief Justice Rehnquist: Thank you, Mr. Merrill.
The case is submitted.
