The Legality of Bankruptcy “Reform”–What About the Word “All” Don’t You Understand?

Article 1, Section 7, Clause 1 of the Constitution (y’know, the document our representatives have sworn to uphold?) reads (bold added, obviously):

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.

Section 325 of “The Bankruptcy Abuse Prevention and Consumer Protection Act of 2005,” as passed by the Senate (WARNING: large HTML file), increases fees, and reads in part:

SEC. 325. UNITED STATES TRUSTEE PROGRAM FILING FEE INCREASE.
(a) Actions Under Chapter 7, 11, or 13 of Title 11, United States Code- Section 1930(a) of title 28, United States Code, is amended–
(1) by striking paragraph (1) and inserting
the following:
(1) For a case commenced under–
(A) chapter 7 of title 11, $200; and
(B) chapter 13 of title 11, $150.; and
(2) in paragraph (3), by striking “$800″ and
inserting “$1000″.

The Chapter 7 filing fee is currently $155; it will increase to $200.
The Chapter 13 filing fee is currently $155; it will change to $150.
The Chapter 11 filing fee (for small businesses) is currently $800; it will increase to $1,000.

The first two paragraphs of the Congressional Budget Office’s cost estimate for the Act (the page with a link to the PDF is HERE) reads as follows (bold added):

CBO estimates that implementing S. 256 would result in gross discretionary costs of $392 million over the 2006-2010 period, primarily to pay for increased responsibilities of the United States Trustees (U.S. Trustees), assuming appropriation of the necessary amounts. At the same time, the act would increase the fees charged for filing certain bankruptcy cases and would change how some of these fees are currently recorded in the budget during the first five years after enactment. We estimate that implementing the act would increase the amount of bankruptcy fees that are treated as an offset to appropriations by $75 million over the five-year period, resulting in an estimated net increase in discretionary spending of approximately $318 million over this period.

In addition, CBO estimates that enacting S. 256 would increase revenues by about $60 million over the 2006-2010 period and by about $140 million over the 2006-2015 period primarily because of provisions that temporarily amend the Treasury’s allocation of filing fees. Finally, enactment of S. 256 would authorize additional judgeships, and we estimate that the mandatory pay and benefits for those positions would cost $26 million over the next five years and $45 million over the 2006-2015 period.

There is NO doubt that this is a bill that is, in part, about “raising revenue.”

The Constitution dictates that it should have originated in the House.

It didn’t; it orginated in the Senate.

Regardless of the merits of the bill, for this reason alone:

- For this reason alone, the bill has no business getting out of the Rules Committee tonight.

- For this reason alone, it should be voted down if it gets to the House Floor.

- For this reason alone, it should be vetoed by the President if it gets to his desk.

- For this reason alone, the courts should (and, one would think, will) nullify the law.

Materiality (the argument that a couple hundred million is not a lot of money) is irrelevant. Congresspeople and President Bush: What about the word “ALL” don’t you understand?

To comply with the Constitution the supposedly “strict constructionist” Republican majority claims to hold so dear, the bill must be rewritten and begin its journey through the Congressional labyrinth all over again. In the HOUSE this time.

UPDATE: Someone in the forefront of the opposition to B-”R,” whose name I won’t use because I don’t have permission, responded to my e-mail about this issue:

Thanks. There’s been some talk of this in the bankruptcy community, and I think a lot of people think you are right. But the main theme seems to be that if someone pushes the point 1) the Speaker of the House will rule otherwise, and 2) the House will initiate and send back to the Senate. From my view, the latter is just fine–more delay. But no one in DC seems intent on pressing it.”

Well, I don’t understand why not.

UPDATE 2, Early May 2005: I received information from outgoing congressman Rob Portman’s office about the issue. Portman’s signed letter said, in part, “S. 256 amends the bankruptcy code but does not raise revenue for the Treasury.” In a followup mailing, his office provided a Congressional Research Service report that says, in the second paragraph:

Only bills to levy taxes in the strict sense of the word are comprehended by the phrase “all bills for raising revenue”; bills for other purposes, which incidentally create revenue, are not included.

It then cites several instances where raising fees was not considered to force a House origination requirement. The closest example was a Senate-passed special assessment for a crime victims’ fund that was allowed to stand because the statute “was not a law raising revenue to support the government generally” (United States vs. Munoz-Flores in 1990).

I appreciate the timely response from Portman and his staff, both of whom had a lot of other things to deal with during that time period.

I’m personally surprised at the interpretation (to me, “all” means “all”), but it appears to be long-standing. Given the precedents, I predict that an attempt to throw out the bankruptcy “reform” law based on the Origination Clause would have a very small chance of succeeding. It could conceivably turn on whether the funds received from bankruptcy fees are commingled in the general Treasury. If they are, I suppose you could argue that in effect when the commingling occurs, the funds become available for “the government generally.” But even if true, that argument would seem to be a long shot at best.