Supreme Court case could have major implications for tax code

 October 17, 2023

In 2017, former President Donald Trump touted his signing of the Tax Cuts and Jobs Act, a piece of legislation that Trump and other conservatives credited with boosting the economy.

However, the bill also contained an obscure provision that has led to a Supreme Court case with major ramifications. 

U.S. couple invested in Indian company

According to the Associated Press, it concerns a requirement that American-owned companies which do business in foreign countries must pay a one-time tax on investors’ shares of profits that have not been passed along to them.

That was how Charles and Kathleen Moore ended up with a $15,000 tax bill stemming from their investment in an Indian company called KisanKraft Machine Tools Private Limited.

The tax penalty came despite Charles Moore stating in a sworn deposition that he and his wife "have never received a distribution, dividend, or other payment."

In response, the Moores filed a lawsuit with assistance from the Competitive Enterprise Institute, an organization that promotes free market principles. The suit maintains that the couple's tax obligations are unconstitutional.

Case could stop a wealth tax from being passed

It points to the 16th Amendment, which states, "The Congress shall have power to lay and collect taxes on incomes, from whatever source derived, without apportionment among the several States, and without regard to any census or enumeration."

"If you haven’t received any income, how can you be required to pay income taxes?" the Associated Press quoted Mr. Moore as asking in a video released by the Competitive Enterprise Institute.

The arguments in Moore's case are set to be heard by the Supreme Court on December 5 and have implications beyond just the current tax code, with legal experts saying a decision in the couple's favor could preempt any form of a wealth tax.

Those legal experts include Steven Rosenthal, who serves as a senior fellow at the Urban-Brookings Tax Policy Center.

"There really was no reason for the court to take it on, other than to send a signal to warn off the Congress from passing a billionaire tax," Rosenthal told the Associated Press.

Legal expert says couple's claim "is full of lies"

However, others watching the case say there are serious problems with the Moores' claim to have simply been passive investors in KisanKraft Machine Tools Private Limited.

This includes the fact that the company paid for Mr. Moore's travel to India four times, suggesting that he played an active role in running the company.

"The original declaration on which the case is built is full of lies," said University of Michigan Law School professor and international tax specialist Reuven Avi-Yonah.

" A free people [claim] their rights, as derived from the laws of nature."
Thomas Jefferson
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