The Supreme Court made a significant decision on Thursday, ruling 7-2 to uphold a Trump-era tax on foreign income that had been challenged in the case of Moore v. United States. The tax, known as Section 965, imposed a one-time transition tax on foreign earnings accrued by certain overseas corporations owned by U.S. shareholders. The plaintiffs, Charles and Kathleen Moore, argued that the tax was unconstitutional because it applied to "unrealized" income, violating the 16th Amendment.
Justice Brett Kavanaugh, in the majority opinion, clarified that the decision did not address the potential for a wealth tax, stating that it was a matter for another day. The case was seen as a proxy battle over the legality of a wealth tax, with experts noting that a victory for the Moores could have significant implications for the tax code.
The Moores, backed by anti-regulatory groups, contended that they should not be required to pay taxes on income they had not received. The Justice Department, on the other hand, argued that the tax was constitutional and that the 16th Amendment did not require Congress to tax only realized gains.
If the Moores had won, it could have resulted in substantial revenue losses for the federal government and made parts of the tax code obsolete. Former House Speaker Paul Ryan cautioned that a victory for the Moores could render a large portion of the tax code unconstitutional.
Overall, the Supreme Court's decision to uphold the tax on foreign income has significant implications for the U.S. tax code, but it does not address the broader issue of a potential wealth tax. The ruling, while not addressing all concerns, sets a precedent for future tax challenges and decisions.