Supreme Court May Upend the U.S. Tax Structure

An upcoming case that will be heard by the Supreme Court could potentially have far-reaching implications on the United States tax structure, according to a new report.

The Roosevelt Institute and the Institute on Taxation and Economic Policy (ITEP) collaborated on the report released Wednesday about Moore v. United States. The case, which is scheduled to be heard in December, deals with whether the U.S. Constitution's 16th Amendment authorizes Congress to tax unrealized sums without apportionment among the states.

Charles and Kathleen Moore are minority shareholders in an Indian farming firm, and they have disputed a provision in the Tax Cuts and Jobs Act passed by Congress in 2017 after the IRS presented them with a $15,000 bill for their investment. The Moores argue the reparation tax is not on income and violates the 16th Amendment that requires direct federal taxes to be apportioned among the states. After losing a suit in District Court in Washington state in 2022, the Moores' dispute will be heard by the Supreme Court.

The Roosevelt Institute and the ITEP explained that before the Tax Cuts and Jobs Act, American individuals and corporations "owning stock in a foreign corporation were allowed to defer payment of U.S. tax on profits generated by the offshore company until those profits were 'repatriated.'"

The think tanks wrote that legal scholars believe the Supreme Court "could rule in a variety of different directions—each with different impacts on Congress' past and future taxing powers."

If the high court sides with the plaintiffs, almost 400 multinational corporations could collectively receive $271 billion in tax relief. The report noted Chief Justice John Roberts and Associate Justice Samuel Alito are said to own stock in 19 companies that could receive a combined $30 billion if the court strikes down the repatriation tax.

Newsweek reached out to the public information officer for the Supreme Court via email for comment.

The report also argues that depending on the scope of the decision, the Supreme Court could "supplant Congress as a major American tax policymaker, putting at legal jeopardy much of the architecture of laws that prevent corporations and individuals from avoiding taxes, and introducing great uncertainty about our democracy's ability to tax large corporations and the most affluent."

Common Dreams wrote about the report on Moore v. United States and said that while justices could take a narrower view on specific parts of the Moore case, a broader ruling could possibly protect individuals from a wealth tax.

The Manhattan Institute, one of eight conservative advocacy groups that filed amicus briefs urging the Supreme Court to hear the Moores' case, argued in a filing that "the case presents the court with an ideal opportunity to clarify that taxes on unrealized gains, such as wealth taxes, are direct taxes that are unconstitutional if not apportioned among the states."

The Roosevelt Institute and the ITEP report further warned that the Supreme Court's ruling could even affect social programs and the federal deficit.

"In Moore, the Roberts Court could decide with the stroke of a pen to simultaneously forgive big business decades of tax dues, increase the federal deficit over the long run, jeopardize future public revenue and essential social programs, escalate these multinational companies' already sizable after-tax profits, and further enrich their shareholders," the report authors wrote.