Court Case Could Stymie Push for Wealth Tax
• 2 min read
- Brief: Taxes
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The U.S. Supreme Court is pondering a case that could scuttle the idea of a wealth tax in America.
In the case (Moore v. United States), a Redmond, Wash., couple is challenging their $15,000 federal tax bill on an investment made in a business in India. They argue the tax violates the 16th Amendment, which allows the government to tax income, because they never received any profits (no realized gains) from the farm-equipment company in which they invested.
At the heart of the case is a 2017 law’s provision allowing American investors, who own companies doing business in other countries, to be taxed one time on their share of profits earned between 1985 and Dec. 31, 2017, that have not been passed along to them. The provision was aimed at domestic companies using their foreign subsidiaries to park money as a shield against U.S. taxes.
The U.S. Justice Department argues that the tax law is constitutional because the 16th Amendment does not restrict Congress to taxing only realized gains.
Anti-regulatory and business groups supporting the Moores contend the 2017 law is like a wealth tax, which would apply to American investors’ assets, like stocks, that currently get taxed only if they’re sold. A proposed Billionaires Income Tax was introduced last month in the U.S. Senate, and backers claim that if the 2017 law is overturned by the high court, it will stymie their efforts to tax the “full income” of wealthy Americans, including unrealized gains.
A ruling is expected this spring.
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