Speculation surrounds President Trump’s proposed border tax, but until the details are released, we can only guess whether the actual plan will include a tax, a tariff or something else entirely. Ultimately, the president’s goal is clear: encourage companies to manufacture in the U.S. rather than abroad. Assuming that the idea of a border tax gains steam, does the president have unilateral authority to enact such a tax?
The Origination Clause of the U.S. Constitution will be the first hurdle to any attempt to impose such a tax through executive order. The Origination Clause in Article I of the U.S. Constitution provides that “All Bills for raising Revenue shall originate in the House of Representatives; but the Senate may propose or concur with Amendments as on other Bills.”
In U.S. v. Munoz-Flores, the Supreme Court considered whether a special assessment that was imposed under a federal statute to provide a source of funds for the Crime Victims Fund constitutes a “Bil[l] for raising Revenue” within the meaning of the Origination Clause. In holding that the special assessment was not a bill for raising revenue, the Court distinguished a statute creating a particular governmental program (and that raises revenue to support that program) from a statute that raises funds generally and that are paid into the general treasury. The former is not a ‘Bill for raising Revenue’ within the meaning of the Origination Clause. According to the Court, revenue bills “are those that levy taxes in the strict sense of the word, and are not bills for other purposes which may incidentally create revenue.”
The holding suggests President Trump might be authorized to enact a border tax, a special assessment or a fee with the specific purpose of, for example, funding a new job training program for displaced workers so long as the tax, assessment or fee is intended to support that program. The president could also go a step further and make it clear that the purpose of imposing the tax on imports is not to raise revenue, but to protect U.S. jobs; all funds would be used specifically to retrain workers under certain government training programs. If the tax is not considered a revenue bill under Munoz-Flores, then it would not implicate the Origination Clause.
The White House recently indicated that it would issue a comprehensive tax plan in the coming weeks. Whether the border tax will be addressed as part of that plan remains to be seen.
Gardere’s international trade group will continue to monitor developments in this area.