The Supreme Court May Preemptively Ban a Federal Wealth Tax

 

The Supreme Court took up a case on Monday that could make it nearly impossible for Congress to pass a federal wealth tax, giving the justices an opportunity to torpedo a major Democratic policy proposal before it can be enacted. The plaintiffs who brought the case have all but urged the court to do exactly that.

In Moore v. United States, the justices will consider whether a provision of former President Donald Trump’s tax-reform law in 2017 violated the Sixteenth Amendment, which allows Congress to collect federal income taxes. As part of a complex restructuring of federal corporate tax laws, the 2017 law imposed a one-time “mandatory repatriation tax” on American taxpayers who owned more than 10 percent of a foreign corporation.

Charles and Kathleen Moore, the titular plaintiffs, owned 11 percent of an Indian farm-equipment company when the 2017 law went into effect. Thanks to the provision in question, they paid roughly $15,000 in additional taxes the following year. The Moores filed a lawsuit against the federal government and argued that the tax was unconstitutional because their partial ownership of the company did not count as “income” under the Sixteenth Amendment.

The lower courts rejected that argument, however, and ruled that the tax had essentially targeted years of deferred foreign income. That prompted the couple to ask the Supreme Court to intervene. While the case hinges on a tax passed by Trump and a Republican-led Congress, the petition invited the justices to use it to prevent Democrats from imposing a federal wealth tax in the future.

“This is no idle threat,” the Moores said in their petition for review, referring to a federal wealth tax. They cited proposals by the Biden administration and Oregon Senator Ron Wyden to tax billionaires based on their assets, none of which have passed Congress. “There is every reason for the Court to resolve the pivotal constitutional question of realization now, when its judgment can inform lawmakers and stands to head off a major constitutional clash down the line,” the couple told the justices.

In a Wall Street Journal op-ed published in 2021, two of the Moores’ lawyers also declared unambiguously that the lawsuit “stands to slam shut the door on a federal wealth tax like the one Sen. Elizabeth Warren wants to enact.” They made a direct pitch to “the courts” to hear the Moores’ case “now” to make it easier to block a wealth tax in the future.

“If the courts confirm the Sixteenth Amendment’s limited reach now, that would relieve them from having to do so in a politically explosive case directly challenging a wealth tax,” the two lawyers concluded. “The courts would do well to remind Congress at this opportune time that its taxing power is not without limits.” […]

-Matt Ford, The New Republic

https://newrepublic.com/post/173913/supreme-court-may-pre-emptively-ban-federal-wealth-tax