US Supreme Court takes up case that could rule out a tax on wealth

The ruling could cut US government revenue by over US$300 billion.

WASHINGTON: The Supreme Court Supreme Court is taking up a case Tuesday (Dec 5) over a Washington couple's US$15,000 tax bill that is widely seen as a test of a never-enacted tax on wwealth.

A decision in favor of Charles and Kathleen Moore of Redmond, Washington, could strike down a provision of the 2017 tax bill that is expected to bring in US$340 billion, threaten other provisions of the tax code and rule out a wealth tax that is favored by some Democrats who argue that the wealthiest Americans don't pay their fair share of taxes.

Paul Ryan, the Wisconsin Republican who was Speaker of the House when the tax bill was passed by a Republican Congress and signed into law by then-President Donald Trump, has called the challenge “misguided” and said “a lot of the tax code would be unconstitutional if that thing prevailed”.

The couple is backed by conservative political groups and business interests, including the US Chamber of Commerce.

The law applies to companies that are owned by Americans, but do their business in foreign countries. It imposes a one-time tax on investors’ shares of profits that have not been passed along to them, in order to offset other tax benefits.

The Moores paid US$15,000 in taxes based on Charles Moore’s investment in an Indian company.

They argue that the tax violates the 16th Amendment, which allows the federal government to impose an income tax on Americans. Moore said in a sworn statement that he never received any money from the company, KisanKraft Machine Tools Private Limited.

Some groups allied with the Moores argue that the challenged provision is similar to a wealth tax, which would apply not to the incomes of the very richest Americans, but their assets, like stock holdings, that now only get taxed when they are sold.

Democratic Senator Ron Wyden of Oregon said a court ruling for the Moores could stymie legislation like the Billionaires Income Tax he introduced last week. “The Moore case could make it impossible to close those loopholes,” Wyden said.

The case also has kicked up ethical concerns and raised questions about the story the Moores' lawyers told in court filings. Public documents show that Charles Moore's involvement with the company, including serving as a director for five years, is far more extensive than court filings indicate.

Senate Democrats had asked Justice Samuel Alito to step aside from the case because of his interactions with David Rivkin, a lawyer who is representing the Moores. The Democrats said Alito had cast doubt on his ability to judge the case fairly because he sat for four hours of Wall Street Journal opinion page interviews with an editor at the newspaper and Rivkin.

Alito rejected the demands in a four-page statement issued by the court in which he said there “is no valid reason” for his recusal.