The Biden administration is still having issues with the Supreme Court. The government’s plans to tax the wealthy may soon be overturned in light of the court’s recent ruling that President Joe Biden’s $430 billion transfer of student debt was unlawful.
Moore v. United States may have the most influence on Biden, despite the fact that the court will hear cases this fall involving the right to bear weapons, the jurisdiction of federal agencies, and whether the phrase “Trump too small” can be trademarked. That debate centers on Biden’s regularly expressed desire for a wealth tax and whether it could be implemented.
“Reward work, not just wealth. Pass my proposal for a billionaire minimum tax,” Biden said during the State of the Union address earlier this year. “Because no billionaire should pay a lower tax rate than a school teacher or a firefighter.”
“Biden later proposed a 25% annual tax on all gains to wealth in excess of $100 million in a given year, including unrealized capital gains which aren’t currently taxable. The White House says that the tax would only apply to the top 0.01% of the highest earners. While the proposal faces long odds with a Republican-controlled House of Representatives, it could be nixed permanently if the high court rules such a tax is unconstitutional,” The Washington Examiner reported.
“The specifics of the Moore case don’t involve huge amounts of money, but center around the same issues of taxation and the definition of the word ‘income,’” the outlet added. “Charles and Kathleen Moore, a Washington state-based couple, made a nearly $40,000 investment into an Indian company in 2005 and never received any money or other payments from the company even though it made a profit every year.”
The source also said:
Under the 2017 tax reform law, they learned that they were subjected to a mandatory repatriation tax of $14,729. They paid that amount and then filed suit seeing a refund and claiming that the tax violates the constitution’s apportionment clause. The Sixteenth Amendment authorizes Congress to “lay and collect taxes on incomes, from whatever source derived, without apportionment among the several states.” That means that the federal government cannot tax stock gains, which are the source of wealth for many billionaires unless those stocks are sold.
Progressive leaders have for years railed against this state of affairs, with Sens. Bernie Sanders (I-VT), Elizabeth Warren (D-MA), and Finance Committee Chairman Ron Wyden (D-OR) supporting a tax on wealth itself rather than direct income. An appeals court ruled that the Moores could be taxed this way, saying “there is no constitutional prohibition against Congress attributing a corporation’s income pro-rata to its shareholder.” But the Supreme Court could reverse that ruling, rendering the repatriation tax and future wealth-based taxes off-limits at the federal level.
“The Sixteenth Amendment allows the federal government to impose income taxes without apportioning them among the states,” said Cato Institute research fellow Thomas Berry. “But courts have always limited those taxes to that word, ‘income,’ and said that word is meaningful. It doesn’t just mean whatever the government wants it to mean.”
The Cato Institute is one of the organizations that have written amicus briefs in favor of the Moores, along with the Chamber of Commerce and Americans for Tax Reform. Hearings are likely to begin in October.
On the subject of whether unrealized capital gains could be considered income, scholars have long disputed. Instead, Berry suggests that Biden and other Democrats try to raise traditional income taxes, which is what he is also attempting to do, as well as through measures like tariffs on imported goods.
Biden frequently raises the idea of a tax on the wealthy in his speeches, claiming that their average tax burden is lower than that of middle-class workers at just 3% of their income.
“You can never predict for certain,” Berry said, ” but I think the justices will be concerned about setting a new precedent here and opening the door to a lot of taxes that we’ve never seen before at the federal level.”