THE MOORE CASE –A DECISION BAD FOR TAXPAYERS BUT GOOD FOR THE FAIRTAX
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On June 20, 2024, the U.S. Supreme Court handed down its decision in the case of Moore v. United States. By a 7-2 margin, the Court ruled that the transition tax defined in section 965 of the 2017 Tax Cuts and Jobs Act was constitutional. That tax was imposed on the unrealized earnings of American citizens holding shares in a foreign corporation.
The Moores owned approximately 13% of KisanKraft, an Indian corporation that was classified as a controlled foreign corporation (CFC) for U.S. federal income tax purposes (U.S. taxpayers owned more than 50% of the shares). KisanKraft generated certain earnings that, under the income tax law at the time, would not be subject to U.S. taxation until such earnings were distributed to its U.S. shareholders. KisanKraft’s earnings remained in the company and were never distributed.
The Supreme Court disagreed and ruled that in this specific instance, taxing unrealized income was constitutional. The reasoning was that KisanKraft actually generated the income, and that it was constitutional for Congress to attribute that income to the Moores.
Justice Kavanaugh, joined by Justices Roberts, Kagan, and Sotomayer wrote the opinion. In that opinion, he carefully tried to craft this as a narrow ruling that applied only to this particular instance. He made it clear that they were not giving Congress blanket authority to tax any and all unrealized income.
Justice Jackson believes that there is no requirement for income to be realized and that it is perfectly fine to tax unrealized gains. She signed on with the majority.
Justice Barrett and Justice Alito stated that the IRS does not have a right to tax unrealized income, but they concurred with Kavanaugh’s opinion apparently because the Moores failed to challenge other provisions where income realized by an entity was imputed to shareholders as taxable.
Justices Thomas and Gorsuch dissented. Justice Thomas clearly stated that income had to be realized before it could be taxed, and did not agree that it could be attributed to shareholders in the manner approved by the majority.
Although the court’s ruling does not authorize the wealth tax, Senator Warren and her allies are doing a victory dance. They apparently don’t read the opinions as everyone else does and claim that their proposed taxes are now approved by the court.
President Biden and other members of his party have made no secret of the fact that they want to tax the unrealized gains of capital assets owned by wealthy Americans. In their eyes, these wealthy taxpayers are being unpatriotic by holding their assets instead of selling them and paying taxes to the federal government.
CONCLUSION
Because the Supreme Court is composed of people who are academics and who, for the most part, support big government, the majority opinion is not surprising. Also, there was a barrage of pressure from the media and other elites that a ruling against taxing all forms of unrealized income would cause significant damage to the income tax system and would seriously undermine the government’s ability to fund itself.
They were correct. There are many provisions in the Internal Revenue Code that would have had to be rewritten if the Court had ruled that only realized income is taxable. While the Court did stop short of giving blanket approval to taxing all unrealized income, they left the door open for the President and people like Senator Warren to be more aggressive in their plans to punish the rich, enrich their friends and push their agenda.
If President Biden is re-elected and the Democrats control both the House and Senate, there will be a flurry of legislation passed and signed into law that makes more and more different kinds of unrealized income taxable. Will it be constitutional? They don’t really care. They know that it will take five or six years and millions of dollars for any challenge to their new taxes to reach the Supreme Court where they could be struck down. The D.C. elites hope that by then, the Court will be packed with justices like Justice Jackson who see no limits on what the government can tax.
In all likelihood, the first new unrealized income taxes will only target wealthy citizens but again, it’s certain that more and more of those taxes will quickly start reaching down to more and more of us.
If the DC elites have their way, it is only a matter of time that the definition of “wealthy” will apply to more and more Americans. Then your assets, including your home if it is valued over a certain amount, will be taxed each even if you have not sold any of the assets.
In like manner, if the stock you purchased for $300,000 decades ago is now worth over a million dollars, you’ll be getting a big tax bill. In the elites’ way of thinking, you have a patriotic obligation to sell that stock and pay taxes on the gain. If you don’t sell, they’re going to tax you anyway.
There are more real-world examples because once you empower the D.C. elite, they will continue to take more and more of our income and assets.
Their reasoning--they are so much smarter than we are and they will use our money much more wisely than we would. They will take care of us—just trust them.
Obviously, the only reason for talking about the Moore case is because the U.S. continues to rely on a corrupt and unworkable income/payroll tax system.
There is no need for all of this drama and the ability of the D.C. elites to control our lives by making us beg not to be taxed on our assets even before we sell them.
There is a simple answer—the FAIRtax. By taxing only the retail consumption of new goods and services, the FAIRtax gives people an unprecedented level of control over their federal taxes. Want to pay less? You can choose to consume less, or you can buy used items that are not subject to the FAIRtax.
In any case, the FAIRtax will never tax any unrealized gains because you can’t make retail purchases with money you don’t have in your pocket.
In addition, the FAIRtax will result in greater freedom for us all, a much more robust economy than we could ever have under the income tax, and will all but eliminate illegal tax evasion.
On June 20, 2024, the U.S. Supreme Court handed down its decision in the case of Moore v. United States. By a 7-2 margin, the Court ruled that the transition tax defined in section 965 of the 2017 Tax Cuts and Jobs Act was constitutional. That tax was imposed on the unrealized earnings of American citizens holding shares in a foreign corporation.
The Moores owned approximately 13% of KisanKraft, an Indian corporation that was classified as a controlled foreign corporation (CFC) for U.S. federal income tax purposes (U.S. taxpayers owned more than 50% of the shares). KisanKraft generated certain earnings that, under the income tax law at the time, would not be subject to U.S. taxation until such earnings were distributed to its U.S. shareholders. KisanKraft’s earnings remained in the company and were never distributed.
The Supreme Court disagreed and ruled that in this specific instance, taxing unrealized income was constitutional. The reasoning was that KisanKraft actually generated the income, and that it was constitutional for Congress to attribute that income to the Moores.
Justice Kavanaugh, joined by Justices Roberts, Kagan, and Sotomayer wrote the opinion. In that opinion, he carefully tried to craft this as a narrow ruling that applied only to this particular instance. He made it clear that they were not giving Congress blanket authority to tax any and all unrealized income.
Justice Jackson believes that there is no requirement for income to be realized and that it is perfectly fine to tax unrealized gains. She signed on with the majority.
Justice Barrett and Justice Alito stated that the IRS does not have a right to tax unrealized income, but they concurred with Kavanaugh’s opinion apparently because the Moores failed to challenge other provisions where income realized by an entity was imputed to shareholders as taxable.
Justices Thomas and Gorsuch dissented. Justice Thomas clearly stated that income had to be realized before it could be taxed, and did not agree that it could be attributed to shareholders in the manner approved by the majority.
Although the court’s ruling does not authorize the wealth tax, Senator Warren and her allies are doing a victory dance. They apparently don’t read the opinions as everyone else does and claim that their proposed taxes are now approved by the court.
President Biden and other members of his party have made no secret of the fact that they want to tax the unrealized gains of capital assets owned by wealthy Americans. In their eyes, these wealthy taxpayers are being unpatriotic by holding their assets instead of selling them and paying taxes to the federal government.
CONCLUSION
Because the Supreme Court is composed of people who are academics and who, for the most part, support big government, the majority opinion is not surprising. Also, there was a barrage of pressure from the media and other elites that a ruling against taxing all forms of unrealized income would cause significant damage to the income tax system and would seriously undermine the government’s ability to fund itself.
They were correct. There are many provisions in the Internal Revenue Code that would have had to be rewritten if the Court had ruled that only realized income is taxable. While the Court did stop short of giving blanket approval to taxing all unrealized income, they left the door open for the President and people like Senator Warren to be more aggressive in their plans to punish the rich, enrich their friends and push their agenda.
If President Biden is re-elected and the Democrats control both the House and Senate, there will be a flurry of legislation passed and signed into law that makes more and more different kinds of unrealized income taxable. Will it be constitutional? They don’t really care. They know that it will take five or six years and millions of dollars for any challenge to their new taxes to reach the Supreme Court where they could be struck down. The D.C. elites hope that by then, the Court will be packed with justices like Justice Jackson who see no limits on what the government can tax.
In all likelihood, the first new unrealized income taxes will only target wealthy citizens but again, it’s certain that more and more of those taxes will quickly start reaching down to more and more of us.
If the DC elites have their way, it is only a matter of time that the definition of “wealthy” will apply to more and more Americans. Then your assets, including your home if it is valued over a certain amount, will be taxed each even if you have not sold any of the assets.
In like manner, if the stock you purchased for $300,000 decades ago is now worth over a million dollars, you’ll be getting a big tax bill. In the elites’ way of thinking, you have a patriotic obligation to sell that stock and pay taxes on the gain. If you don’t sell, they’re going to tax you anyway.
There are more real-world examples because once you empower the D.C. elite, they will continue to take more and more of our income and assets.
Their reasoning--they are so much smarter than we are and they will use our money much more wisely than we would. They will take care of us—just trust them.
Obviously, the only reason for talking about the Moore case is because the U.S. continues to rely on a corrupt and unworkable income/payroll tax system.
There is no need for all of this drama and the ability of the D.C. elites to control our lives by making us beg not to be taxed on our assets even before we sell them.
There is a simple answer—the FAIRtax. By taxing only the retail consumption of new goods and services, the FAIRtax gives people an unprecedented level of control over their federal taxes. Want to pay less? You can choose to consume less, or you can buy used items that are not subject to the FAIRtax.
In any case, the FAIRtax will never tax any unrealized gains because you can’t make retail purchases with money you don’t have in your pocket.
In addition, the FAIRtax will result in greater freedom for us all, a much more robust economy than we could ever have under the income tax, and will all but eliminate illegal tax evasion.
Please go to this link to invest in AFFT and help us pass the FAIRtax. It’s an investment in your and your family’s future.
THE SOLUTION—PASS THE FAIRTAX!
Why would D.C. pass the FAIRtax and give up this almost unlimited source of donations? The only way that they will is if the rest of us demand it!
Isn’t it time to end this ludicrous tax collection system and the IRS?
There is going to be a vote on the FAIRtax in the House of Representatives.
We now have the opportunity to force all Members of the House to show where they stand. They can:
HELP BRING ABOUT REAL TAX REFORM AND STOP FUTURE IRS ABUSES
By contributing (investing) $10.40 per month, you help provide a financial base to AFFT. If you can make larger contributions (investments), these will be used not for salaries, as we are all volunteers, but for the needed updates to our economic studies which will be vital for all future years.
THE SOLUTION—PASS THE FAIRTAX!
Why would D.C. pass the FAIRtax and give up this almost unlimited source of donations? The only way that they will is if the rest of us demand it!
Isn’t it time to end this ludicrous tax collection system and the IRS?
There is going to be a vote on the FAIRtax in the House of Representatives.
We now have the opportunity to force all Members of the House to show where they stand. They can:
- Vote for the present income/payroll tax system or for the FAIRtax.
- Support the corrupt income tax and the IRS or eliminate it. It can’t be any simpler than that.
- Hide the true cost of their government or pass the FAIRtax and show everyone the true cost of government on each retail receipt.
- Support the largest transfer of power from government to the people, the FAIRtax, or not.
HELP BRING ABOUT REAL TAX REFORM AND STOP FUTURE IRS ABUSES
By contributing (investing) $10.40 per month, you help provide a financial base to AFFT. If you can make larger contributions (investments), these will be used not for salaries, as we are all volunteers, but for the needed updates to our economic studies which will be vital for all future years.
Please go to this link to invest in AFFT and help us pass the FAIRtax. It’s an investment in your and your family’s future.