In a move that could drastically alter the financial landscape of the United States, the U.S. Supreme Court is set to hear oral arguments in December on a case which, if decided in a certain way, could result in a significant loss of federal revenue. The case in question, Moore v United States, pertains to the taxation of unrealized gains, such as stocks or bonds, which have not yet been liquidated by the owner.
The Potential Impact of the Case
The U.S. tax code stipulates that income must be realized before it can be taxed. Critics argue that this is a vague concept that courts have sidestepped due to administrative difficulties. If the court limits its decision to the specific tax referenced in the case, known as the mandatory repatriation tax, a ruling in favor of the plaintiffs could lead to a loss of $340 billion over the next decade, as per the Justice Department.
Such a verdict would have far-reaching implications. It could potentially influence wealth taxes, such as the one proposed by the Biden administration for billionaires in 2022, and large sections of the international tax regime. The case's significance is underscored by the fact that the U.S. solicitor general herself is scheduled to argue it before the justices. As Harvard University tax law professor Thomas Brennan puts it, it's the 'quadrillion-dollar question.'
Questions around the Case
There are concerns that the outcome of the case could destabilize the nation's tax system. The case also raises questions about the credibility of the personal stories presented by Charles and Kathleen Moore, the Washington state couple challenging the tax. Records show that Charles Moore served on the board of the company at the heart of the case for five years and made a substantial cash contribution to it. The Supreme Court's verdict on this case is highly anticipated and could mark a pivotal moment in U.S. fiscal jurisprudence.