The Supreme Court is currently hearing oral arguments in a case that could have significant implications for the U.S. tax code and federal revenue. The case, Moore v. United States, involves Charles and Kathleen Moore, a Washington couple who own a controlling interest in a profitable foreign company impacted by a tax implemented through former President Donald Trump's 2017 tax overhaul.
The Moores are challenging a levy on company earnings that were not distributed to them, which raises questions about the definition of income and could potentially impact the entire U.S. tax code. Experts believe that this case could have far-reaching effects on fiscal policy, potentially making it one of the most significant court decisions in recent history.
The case centers around a levy known as "deemed repatriation," which was introduced as part of the 2017 Tax Cuts and Jobs Act. This legislation required a one-time levy on earnings and profits accumulated in foreign entities after 1986. The Moore case questions whether individuals must "realize" or receive profits before incurring taxes, a matter that has been raised in previous discussions about billionaire taxes and could also impact future proposals, including wealth taxes.
Former House Speaker Paul Ryan, who helped draft the Tax Cuts and Jobs Act, has stated that the goal of the legislation was not to justify a wealth tax. He believes that using the Moores' argument to block a wealth tax would require significant changes to the tax code.
Depending on the Supreme Court's decision in this case, there could be either minor or major effects on the tax code. If the court determines that the Moores incurred a tax on unrealized income and deems the levy unconstitutional, it could impact the future taxation of pass-through entities such as partnerships and limited liability corporations.
Furthermore, there is a potential for a substantial impact on federal revenue, which could influence future tax policy. If deemed repatriation is struck down for corporate and noncorporate taxpayers, the Tax Foundation estimates a $346 billion reduction in federal revenue over the next decade.
However, it is important to note that a decision on this case is not expected until 2024, making it difficult to predict how the Supreme Court will rule. There is currently a significant amount of uncertainty surrounding the scope and implications of this case.