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Definition of 'Formal Tax Legislation'
The steps required to propose a new tax law or a change to an existing one. The process involves the President and Congress.
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Investopedia explains 'Formal Tax Legislation'
Here is how formal tax legislation works:
1. A tax bill starts in the House of Representatives and is sent to the Ways and Means Committee.
2. The committee members reach agreement about the legislation and draft a proposed tax law. 3. The bill is forwarded to the full House for debate, amendment (if necessary), and approval.
4. The bill is sent to the Senate for more review and a rewrite by the Finance Committee.
5. This version is now presented to the Senate for approval.
6. After Senate approval, the bill is sent to a joint committee of House and Senate members who try to compromise and cooperate with each other on a new version.
7. The compromise version of the bill is sent to the House and the Senate for further approval.
8. After all this, it goes to the President, who may sign it, making it law, or veto it by not signing.
9. If the president vetoes the bill, Congress can attempt to override the veto with a 2/3 vote of each house. If Congress is successful, the bill becomes law regardless of the presidential signing.
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