News/Commentary

Government could tax net worth after SCOTUS ruling

October 31, 2023 | | Print Article

A new Supreme Court ruling could make a dreaded wealth tax legal, allowing the government to potentially tax your net worth instead of your earnings.

Bloomberg Law is reporting that “The US Supreme Court’s decision in the foreign tax earnings case Moore v. United States may have implications far beyond the question presented.”

Many believed that the case was originally about income taxes but the unintentional consequence of it may, in fact, pave the way for a federal wealth tax, an opening leftists have been drooling over.

“The question before the justices is straightforward — can the IRS tax the shareholders of a foreign corporation on the company’s income without a cash dividend or other distribution? Partners are taxed even if no cash is distributed, so could the same rule apply to corporate shareholders?” Bloomberg Law asked.

“Without an actual cash distribution, the petitioners say, the shareholders haven’t ‘realized’ any income that can be properly taxed under the 16th Amendment. The government disagrees, arguing there’s no realization requirement in the Constitution — only the requirement for economic gain or profit. The shareholder’s economic gain is a share of the company’s income, even if not yet distributed, the government says,” the legal outlet reported.

If petitioners are correct on the case-setting precedent, it could result in far more than just taxing shareholders. They contend that it could open the door to federal wealth taxes that could in essence turn our economic system on its head and devastate it even more.

The government is disingenuously asserting that the Supreme Court typically only rules on the constitutionality of provisions directly involved in the case. Since the case deals with tax provisions, the federal government is claiming that wealth taxation should not be an issue here, but according to Bloomberg Law that is not correct.

“According to the latest briefs, filed by some of the country’s top law professors, the issue of wealth taxes is clearly on the table. So the big issue may be how the government wins — if it does win. Based on our review of the roughly 45 briefs filed so far, there are three options,” the legal site noted.

Bloomberg Law outlines the first option:

The narrowest possible government win would be that advocated in the brief filed by L.E. Simmons, a private investor. The court would uphold the constitutionality of the Mandatory Repatriation Tax (and Subpart F), but not for any of the reasons argued by the government or the lower courts in Moore.

Those taxes are constitutional only because they tax the foreign source income of a foreign company, which otherwise isn’t subject to any US corporate income tax. Simmons’ brief also argues that the court should correct or vacate the erroneous reasoning of the lower courts and clarify that there are important constitutional limits on income taxation.

Those limitations might be a problem for proposals to tax unrealized capital gains but they would have no application in this case.

The second outcome that is being pushed by the government and leftists would hold that the mandatory repatriation tax is constitutional. The reasoning behind that ruling would entail the premise that there’s “no constitutional requirement that income be realized. Congress can tax unrealized income as long as there is some economic gain.”

That would open the door for leftist proposals such as the “billionaire income tax.”

The third outcome is the worst of the lot and would skirt the 16th Amendment entirely, potentially finding that federal wealth taxes are entirely constitutional.

“If the goal were to redistribute the nation’s wealth, Congress might consider an annual tax of 10% of individual net worth over $10 million, 20% of individual net worth over $100 million, and 50% of individual net worth over $1 billion. That could include IRAs and possibly wealth owned by corporations or institutional investors. And that likely would be in addition to normal income taxes,” Bloomberg Law posited.

That would possibly drive the wealthy and big businesses out of the country and crush the working class as well.

According to professors quoted by the legal outlet, “direct taxes on real estate wouldn’t be allowed without apportionment. But that wouldn’t preclude a federal wealth tax imposed on stocks, bonds, commodities, or partnership interests.”

The Fifth Amendment could be used to counter the argument for federal wealth taxes.

“In theory, it prevents Congress from seizing private property without compensation, even if the seizure is done in the form of a wealth tax,” Bloomberg Law contends.

Moore v. United States appears to be a much more important case than originally thought and certainly has far more implications depending on the ruling by the high court.

DONATE TO AMERICAN WIRE

If you are fed up with letting radical big tech execs, phony fact-checkers, tyrannical liberals and a lying mainstream media have unprecedented power over your news please consider making a donation to American Wire News to help us fight them.

$10
$15
$25
$50
Other
$
Thank you for your donation!
Latest posts by Terresa Monroe-Hamilton (see all)

Comment

We have no tolerance for comments containing violence, racism, profanity, vulgarity, doxing, or discourteous behavior. If a comment is spam, instead of replying to it please click the ∨ icon below and to the right of that comment. Thank you for partnering with us to maintain fruitful conversation.

Latest Articles