The Biden administration is facing challenges from the Supreme Court following its recent ruling that President Joe Biden’s $430 billion student debt transfer was unlawful. This decision could potentially impact the administration’s plans to implement taxes on the wealthy.
While the court’s upcoming cases this fall will involve topics such as gun rights, federal agency authority, and trademarking, the case of Moore v. United States could hold significant consequences for Biden’s policies. This case revolves around the question of whether Biden has the authority to impose a wealth tax, a proposal he has frequently advocated for.
Biden had emphasized during the State of the Union address earlier in the year, “Reward work, not just wealth. Pass my proposal for a billionaire minimum tax.” He further proposed a 25% annual tax on gains to wealth exceeding $100 million in a year, including unrealized capital gains. This tax, aimed at the top 0.01% of high earners, faces challenges with a Republican-controlled House but could be permanently halted if the Supreme Court rules it unconstitutional.
The specific case of Moore doesn’t involve substantial sums but centers on taxation and the interpretation of “income.” Charles and Kathleen Moore invested almost $40,000 in an Indian company in 2005 and received no payments despite the company’s profits. Following the 2017 tax reform law, they faced a mandatory repatriation tax of $14,729, which they contested in court, claiming it violates the constitution’s apportionment clause.
The 16th Amendment permits Congress to tax incomes without state apportionment. However, this means the federal government can’t tax stock gains that contribute to billionaires’ wealth unless the stocks are sold.
Progressive figures like Senators Bernie Sanders, Elizabeth Warren, and Ron Wyden have long argued for taxing wealth rather than just direct income. While an appeals court ruled in favor of taxing the Moores, stating that attributing a corporation’s income pro-rata to its shareholder is constitutional, the Supreme Court could overturn this ruling, potentially impacting future wealth-based taxes.
Thomas Berry, a Cato Institute research fellow, emphasized that courts have historically limited taxes to the term “income” and stressed that it holds specific meaning, not a broad interpretation.
Hearings for this case are expected to start in October, and the Supreme Court’s decisions may influence federal taxation and administrative policies. Experts suggest that Biden and other Democrats could pursue conventional income tax increases and tariffs on imported goods as alternative measures. The Court’s ruling could set significant precedents, potentially opening doors to new federal taxes.
The Supreme Court’s docket for the upcoming term includes cases that challenge the constitutionality of agency funding schemes exempt from congressional oversight. Additionally, the practice of extending judicial deference to agency interpretations of laws will be scrutinized. Another case aims to reintroduce jury trials for certain civil cases, further indicating the Court’s intent to examine the role of federal agencies and administrative procedures.