July 8, 2023
What is considered taxable income? Were big corporations and wealthy investors unconstitutionally taxed to the tune of billions of dollars and will the taxing powers of congress be changed?
Those are the question the Supreme Court has just agreed to answer in its next term. But that’s not the only case they’ll hear. The justices have also agreed to hear a very controversial gun case which I told you about in the video right before this one.
So let me explain this tax case and even if you’re not a wealthy investor or a corporation you need to pay attention and I’ll tell you why in a second.
It all comes down to what is considered taxable income. In Moore vs. The United States Charlie and Kathleen Moore are suing the US government over almost $15,000 they were taxed. The tax stems from the 2017 Trump era Republican tax law that says people who own at least 10% of foreign corporations, even if the companies’ earnings have not been given to US shareholders – or realized — are subject to a tax. The tax also applies to 30-years of profits that US based companies held overseas that haven’t been repatriated. The Moores say they hadn’t realized any actual income from their investment in this India-based company so the tax is bogus. They sued saying based on the 16th Amendment, Congress took its taxing power too far by considering unrealized money as taxable income. The couple also argues that these same 16th Amendment questions will come up again if the president and congress are successful in their attempts to create new taxes for the super wealthy.
The 16th Amendment says “the congress shall have the power to lay and collect taxes on incomes, from whatever source derived, without apportionment among the several states, and without regard to any census or enumeration.” Basically – the constitution says – have at it Congress. You get all the power to create and levy whatever taxes you want on anyone in any state that you want. In the past – the Supreme Court has rarely gotten involved in setting boundaries or rules for what counts as income and what Congress considers taxable. Really – the last time was in 1920.
Now – if you’re not a corporation or wealthy investor who would be subject to this tax, why should you care? Because since 2017 the US government has collected hundreds of billions of dollars from this tax. So if the supreme court rules in favor of the Moores and says this tax went too far — all those wealthy investors and corporations will likely seek refunds to get their money back. That means money the government has already used or has been counting on to pay for programs for you and me — could be gone.
Read the docket for Moore vs United States here.
