The Supreme Court will soon hear a lawsuit that seeks to kill a leading proposal to reduce wealth inequality in the United States, even before that proposal becomes reality.
During her 2020 presidential campaign, Sen. Elizabeth Warren (D-MA) proposed a 2 percent wealth tax on Americans worth over $50 million. The idea was that, rather than merely taxing very wealthy people’s income and leaving their accumulated capital intact, the new tax would gradually chip away at massive fortunes and start to bring wealth inequality under control.
Warren, of course, did not become president. And congressional Republicans would endorse appointing Lucifer to lead the Treasury Department before they would allow such a tax to become law. So the idea of a wealth tax remains a pipe dream — shared by many in the Democratic Party, but with no chance of becoming law anytime soon.
Nevertheless, on December 5, the Supreme Court will hear a preemptive strike on the very concept of wealth taxes.
The plaintiffs’ arguments in Moore v. United States have little basis in law — unless you think that a list of long-ago-discarded laissez-faire decisions from the early 20th century remain good law. And a decision favoring these plaintiffs could blow a huge hole in the federal budget. While no Warren-style wealth tax is on the books, the Moore plaintiffs do challenge an existing tax that is expected to raise $340 billion over the course of a decade.
But Republicans also hold six seats on the nation’s highest Court, so there is some risk that a majority of the justices will accept the plaintiffs’ dubious legal arguments. And if they do so, they could do considerable damage to the government’s ability to fund itself.
“Realization,” briefly explained
Moore involves a fairly basic tax accounting concept: realization. Ordinarily, the federal government does not tax income until it has been “realized,” which most of the time means that someone purchased an asset, sold it at a…
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