The Supreme Court’s decision on taxing offshore income could have been an indirect but important step in the wealth tax battle, but it didn’t turn out that way.
The justices decided Thursday not to address the legality of taxing a household’s paper profits, emphasizing that their 7-2 decision was narrow and limited only to the provisions of the 2017 tax cuts at issue.
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Both proponents and opponents of a wealth tax portrayed the decision as a victory for their side.
“The fight continues on taxing the wealthy, passing a wealth tax on ultra-millionaires and billionaires, and making the system fairer,” said Sen. Elizabeth Warren, a progressive Democrat from Massachusetts who has pushed her own wealth tax proposals. in a message on X Thursday.
The statement “is great news. Next year, there will be nothing stopping Congress from making the rich pay,” said Lindsay Owens, executive director of the Groundwork Collaborative, a progressive advocacy group.
On the other hand, a future case dealing with what counts as taxable income “could get a friendly hearing from a substantial portion of the Court,” Dan Greenberg said in a statement. Greenberg is general counsel of the libertarian Competitive Enterprise Institute and one of the lawyers for the Washington couple who sued over their tax bill in Moore v. United States, the case just decided by the Supreme Court.
So the fate of proposals to raise taxes on ultra-rich Americans may have to wait for the results of November’s congressional and presidential elections, observers say.
With large parts of the 2017 tax cuts implemented during the Trump administration set to expire at the end of 2025, the stakes for taxes are already high in the upcoming elections.
The party that controls the White House and Congress will determine what happens next in the tax code. Among other things, five of the seven income tax rates are about to move back to higher rates. That includes the top rate of 37%, which would rise to 39.6%.
The Biden administration has a proposal it calls a minimum income tax for billionaires, which would be a 25% tax on households worth at least $100 million and include unrealized capital gains in its calculations.
In court filings, the Washington couple said the administration had unsuccessfully sued for the Supreme Court to preemptively reject proposals like those from the Biden administration.
With post-election tax negotiations looming, the unanswered questions from Thursday’s decision leave “more options on the menu,” said John Stanford, managing director of the Prism Group, a Washington, D.C.-based public affairs firm that helps companies , nonprofits and other organizations. organizations.
“We just don’t have a lot of revenue raisers on the table that would allow either side to achieve their goals,” he said. “Maybe that makes this attractive, and if you could explain it and sell it – that it only affects a few Americans – it could be politically popular.”
Still, any form of wealth tax “still has a long way to go, even in the Democratic party,” Stanford said.
If President Joe Biden defeats former President Donald Trump and Democrats control Congress, there is a ‘non-trivial’ chance that super-rich people could face higher taxes, and even taxes on their wealth rather than on their income , said Howard Gleckman, a senior fellow at the independent. Center for Tax Policy.
But such a plan would still have to pass the Supreme Court, he said. And for wealth tax proponents, he added, “if I were them, I wouldn’t take much comfort in this case.”
The Biden campaign did not immediately respond to a request for comment.
The Trump campaign said Trump would offer more tax cuts. “When President Trump is back in the White House, he will call for more tax cuts for all Americans and revive America’s energy industry to reduce inflation, lower the cost of living and pay down our debt ” said campaign spokeswoman Karoline Leavitt.
‘Nothing in this opinion’
Charles and Kathleen Moore took issue with a $14,729 tax bill related to their stake in a company that caters to rural farmers in India.
The Moores never returned a dime on their investment, said dissenting Judge Clarence Thomas. However, the company did realize the investment and the tax law rightly returned the income to the couple, the majority said.
The majority decision was at pains to emphasize that it stayed close to the facts of a dispute over the mandatory repatriation tax, which targeted the income of foreign subsidiaries of U.S. parent companies.
“Nothing in this opinion should be read as authorizing any hypothetical effort by Congress to tax both an entity and its shareholders or partners on the same undistributed income realized by the entity,” Judge wrote Brett Kavanaugh in majority opinion.
The majority did not address the overarching question of whether profits must be converted into real income before taxes can be introduced.
Yet there is a majority opinion, two different agreements and a dissenting opinion hidden in the decision. In parsing Moore v. United States, some observers say many on the bench expect income to be realized before taxes kick in.
That wouldn’t bode well for something like Biden’s proposed minimum income tax for billionaires, said Alan Cole, senior economist at the nonpartisan Tax Foundation.
Justice Amy Coney Barrett sided with the majority, but wrote a concurring opinion with Justice Samuel Alito that is “about as thin of an opinion as you can get,” Cole said.
Following Barrett and Alito, along with Thomas and fellow dissident Neil Gorsuch, Cole said only one more vote was needed to say income must be realized before taxes apply.
“If you’re in favor of the wealth tax, I think it’s entirely possible that this composition of the court will never be good for you,” Cole said.
Of course, the composition of the Supreme Court itself also depends on elections.
The next president will get the chance to choose at least two new Supreme Court nominees, Biden reportedly said at a recent fundraiser in Los Angeles.
