The Supreme Court heard oral arguments on Tuesday in a case that could both save the rich billions of dollars and hamper President Joe Biden and Democrat from imposing certain types of wealth taxes in the future.
The case, Moore vs the United States, could have sweeping ramifications for the existing tax code, potentially overturning multiple provisions that largely hit well-off Americans and costing the federal government hundreds of billions of dollars in revenue.
The case centers on a measure in the Tax Cuts and Jobs Act, which Republicans in Congress passed in 2017. It created a one-time transition tax levied on shareholders on undistributed profits accrued between 1986 and the end of 2017 by certain foreign corporations that are majority owned by Americans. The provision is expected to raise $340 billion over a decade.
At the close of a spirited two hours of arguments Tuesday, a majority of the justices appeared persuaded by the federal government’s arguments that the tax on such overseas investments should be upheld.
US Solicitor General Elizabeth Prelogar contended that the 2017 tax fell easily within Congress’ 16th Amendment taxing power and legal precedent. She said Congress had repeatedly enacted such taxes on overseas investments, and that the Supreme Court had repeatedly upheld the measures. She dismissed several hypothetical scenarios from justices questioning whether a decision upholding the Mandatory Repatriation Tax would lead to more aggressive moves by Congress.
Justice Brett Kavanaugh, often a crucial vote at the center of the court, seemed particularly inclined to support a narrow ruling that would not reverberate to other US taxing policy.
Charles and Kathleen Moore, who were investors in an India-based company, were hit with a $15,000 tax bill because of the provision, though they say that the business reinvested its earnings and never distributed any amount to them.
The couple contends that the transition tax violates the 16th Amendment, which grants Congress the power to levy taxes on income, because they never received any of the company’s profits. Both a federal district court and the 9th US Circuit Court of Appeals rejected their arguments.