SCOTUS: Moore v United States - Tax on unrealized income

[searcher]

WASHINGTON, Dec 5 (Reuters) - U.S. Supreme Court justices on Tuesday appeared hesitant to upend a tax on Americans who have invested in certain foreign corporations, as they pondered the meaning of "income" in a case that could undermine efforts by some Democratic lawmakers to impose a wealth tax on the very rich.

The justices heard arguments in an appeal by Charles and Kathleen Moore - a retired couple from Redmond, Washington - of a lower court's decision rejecting their challenge to the tax on foreign company earnings, even though those profits have not been distributed to shareholders.

More:

US Supreme Court wary of upending tax on Americans' foreign earnings

U.S. Supreme Court justices on Tuesday appeared hesitant to upend a tax on Americans who have invested in certain foreign corporations, as they pondered the meaning of "income" in a case that could undermine efforts by some Democratic lawmakers to impose a wealth tax on the very rich.

www.reuters.com

 

[pmbug]

They are more worried about implications than whether or not it's Constitutional. It sounds like this is going to end up getting justified by a total perversion of logic much like the ACA decision.

 

[Goldhedge]

This would be a total disaster for America.
I know a liberal lawyer up in Boulder and he's already doing this with tenant's rents and landlords.
Suing landlords who rent for market prices!

 

[JayDubya]

So if the SCOTUS agrees that unrealized gains should be considered as taxable income does that mean that every year my property taxes go up (they always go up) that in addition to paying the property tax I also have to pay a tax on my unrealized gain as well?

If this ruling goes through, I get the feeling that a bunch of folks from the old neighborhood are gonna run into a whole bunch of "unrealized losses" and file their tax return accordingly. Push that envelope.

 

[pmbug]

So if the SCOTUS agrees that unrealized gains should be considered as taxable income does that mean that every year my property taxes go up (they always go up) that in addition to paying the property tax I also have to pay a tax on my unrealized gain as well?
...

 

[Cigarlover]

This would be a total disaster for America.
I know a liberal lawyer up in Boulder and he's already doing this with tenant's rents and landlords.
Suing landlords who rent for market prices!

And that's when about 100 million Americans should exercise their 2nd amendment rights and throw them all out of DC. Shut down the entire criminal enterprise and build it back the way it was intended by the constitution.

 

[pmbug]

Not related to the court case specifically, but to the topic:

Taxing unrealized capital gains on property, stocks, and other assets is not just a bad idea, it’s an economic fallacy that undermines economic growth and personal liberty. Unfortunately, President Biden’s $7.3 trillion budget proposes such a federal tax. Vermont and ten other states have made similar moves.

This tax should be rejected, as it is fundamentally unjust, likely unconstitutional, and would hinder prosperity and individual freedom.

A tax on unrealized capital gains means that individuals are penalized for owning appreciating assets, regardless of whether they have realized any actual income from selling them.
...
Adam Michel of Cato Institute explained two types of unrealized taxes in President Biden’s latest budget:

Under current law, capital gains are taxed when the gain is realized — when the investment is sold and there is an actual profit to tax… The budget proposes eliminating step‐up in basis, making death a taxable event. The change applies to unrealized capital gains over $5 million for single filers ($10 million married).

And secondly,

The budget proposes a new minimum tax of 25 percent on income and unrealized capital gains for taxpayers with more than $100 million in total wealth. This new minimum tax would be a third, parallel income tax system, adding to the existing alternative minimum tax. The new minimum tax applies to two entirely new tax bases — wealth and unrealized capital gains. Defining and taxing wealth and unrealized capital gains pose numerous practical challenges and high economic costs.

...

Unrealized Gains Tax is an Economic Fallacy | The Daily Economy

"Taxing unrealized capital gains from property, stocks, and other assets is a bad idea. It undermines economic growth, stifles innovation, and infringe ...

www.aier.org

 

[Joe King]

"hinder prosperity and individual freedom."

That'what most politicians think is the purpose of government.

It's certainly how they act.

 

[pmbug]

Sad banana:

The Supreme Court on Thursday upheld a provision of a 2017 corporate tax reform law, known as the mandatory repatriation tax, that taxes the undistributed profits from U.S. shares of foreign corporations in which Americans own a majority. An American couple had challenged the constitutionality of the one-time tax, which was imposed on earnings after 1986 and would increase the couple’s tax bill by approximately $15,000. But by a vote of 7-2, the court ruled that the tax does not violate the Constitution.

Justice Brett Kavanaugh wrote for the majority. Stressing that the court’s ruling was a narrow one, Kavanaugh noted that a contrary decision “could render vast swaths of the Internal Revenue Code unconstitutional.”
...
In its 24-page ruling, the majority did not resolve the question whether – as the Moores contended and the government disputed – the Constitution requires income to be realized before it can be taxed. Instead, Kavanaugh explained, the real “precise and narrow question” before the justices was whether Congress can attribute income that an entity has realized but not distributed to its shareholders or partners and then tax that income. For Kavanaugh and the four justices who joined his opinion – Chief Justice John Roberts and Justices Sonia Sotomayor, Elena Kagan, and Ketanji Brown Jackson – the answer was clear from the Supreme Court’s “longstanding precedents”: yes, although they stressed that their ruling was a narrow one that “applies when Congress treats the entity as a pass-through.”

Moreover, Kavanaugh continued, “in an effort to contain the blast radius of their legal theory,” the Moores have conceded that other taxes – such as partnership taxes, taxes on S-corporations, and taxes under subpart F of the Internal Revenue Code, which applies to American-controlled foreign corporations – are constitutional. Because the Moores “cannot meaningfully distinguish” the mandatory repatriation tax from those other taxes, Kavanaugh reasoned, their argument, “taken to its logical conclusion,” would mean that other parts of the code are also unconstitutional – which could in turn cost the federal government “trillions in lost tax revenue.”

“The logical implications of the Moores’ theory would therefore require Congress to either drastically cut critical national programs or significantly increase taxes on the remaining sources available to it — including, of course, on ordinary Americans.” “The Constitution,” Kavanaugh concluded, “does not require that fiscal calamity.”
...

Court upholds Trump-era corporate tax on foreign earnings - SCOTUSblog

The Supreme Court on Thursday upheld a provision of a 2017 corporate tax reform law, known as the mandatory repatriation tax, that taxes the undistributed profits from U.S. shares of foreign corporations in which Americans own a majority. An American couple had challenged the constitutionality of th

www.scotusblog.com

So they based their ruling upon how it would affect tax revenues instead of it's actual legal merit?

 

[Joe King]

So they based their ruling upon how it would affect tax revenues instead of it's actual legal merit?

Sounds that way.

Kavanaugh reasoned, their argument, “taken to its logical conclusion,” would mean that other parts of the code are also unconstitutional – which could in turn cost the federal government “trillions in lost tax revenue.”

With a proper reading of the Constitution, the entire IRC is unConstitutional.

 

[pmbug]

...
The big news that I glean from reading the opinions in Moore v. United States is that both Biden Supreme Court appointee, Justice Ketanji Brown Jackson and Joe Biden himself, though his Justice Department, think that Congress has limitless power to tax unrealized capital gains or to enact a wealth tax on your net worth. ...

Moore v. United States: Joe Biden Thinks He Can Tax Gains in the Value of Your House When You Have Not Yet Sold It

The Biden Solicitor General's office and Justice Ketanji Brown Jackson think that cases under the Taxation Clause or the 16th amendment are political questions.

reason.com

Justice KBJ is awful - just awful.

 

[Joe King]

Justice KBJ is awful - just awful.

True that. I don't think she's ever read the Constitution.