The United States Supreme Court has voted to uphold a tax on foreign investment that was introduced during President Donald Trump’s administration.
However, the high court left larger questions about taxing unrealized income unanswered.
In a 7-2 ruling, the court affirmed the one-time mandatory repatriation tax that was included in the 2017 Trump tax cuts.
A couple, Charles and Kathleen Moore, challenged the tax after they received a $15,000 bill on their investment in an Indian company.
The Moores argued that the tax was illegal under the Sixteenth Amendment because their profits were unrealized.
The Supreme Court found that the income was realized by the company and attributable to its shareholders.
Justice Brett Kavanaugh wrote:
“[T]he precise and narrow question that the Court addresses today is whether Congress may attribute an entity’s realized and undistributed income to the entity’s shareholders or partners, and then tax the shareholders or partners on their portions of that income.
“This Court’s longstanding precedents, reflected in and reinforced by Congress’s longstanding practice, establish that the answer is yes.”
Kavanaugh emphasized that the “narrow” ruling has nothing to say about proposals to tax wealth or unrealized income.
In a fiery dissent, Justice Clarence Thomas blasted the court’s ruling as “cheap.”
Thomas argued that the ruling was preoccupied with consequences rather than the law.
In its ruling, the majority warned that similarities between the repatriation tax and other taxes, such as taxes on partnerships, would result in financial “calamity” if the court ruled for the Moores.
Thomas accused the court of ducking the issue at hand.
He warns that it will end up opening the door to unconstitutional taxes in the future.
“The majority’s analysis begins with a list of nonexistent taxes that the Court does not today bless, including a wealth tax,” he wrote.
“But, if the Court is not willing to uphold limitations on the taxing power in expensive cases, cheap dicta will make no difference,” he added.
While the court was silent on the legality of taxing unrealized gains, Samuel Alito and Amy Coney Barrett said in a concurring opinion:
“The answer is straightforward: No.”
Despite the caveats in the court’s opinion, progressives like Sen. Elizabeth Warren (D-MA) celebrated the ruling.
Warren said the ruling is a stepping stone toward more ambitious tax proposals.
The socialist senator, who frequently spreads tax misinformation related to wealthy non-Democrats such as Elon Musk, called for increased efforts to target “right-wing billionaires.”
“Right-wing billionaires hoped an obscure legal case would blow up the tax code to avoid paying what they owe, but this effort failed at the Supreme Court,” she wrote in a post on X.
“The fight goes on to tax the rich, pass a wealth tax on ultra-millionaires and billionaires, and make the system more fair.”
READ MORE – Liberal ‘Christian’ Group Launches Effort to Remove Samuel Alito from Supreme Court
