Corporate Accountability

RELEASE: Supreme Court Oral Argument Shows Conservative Attempt to Limit Congress’s Taxing Power is Misguided

WASHINGTON, DC – Following oral argument at the Supreme Court this morning in Moore v. United States, a case in which the Court is considering a lawsuit that could limit Congress’s power to tax income under the Sixteenth Amendment, Constitutional Accountability Center Senior Appellate Counsel Brian Frazelle issued the following reaction:

Although this case involves an obscure, one-time tax passed by a Republican Congress and signed by President Trump, its proponents have billed the case as a vehicle for the Court’s conservative supermajority to preemptively restrict future Congresses from enacting a wealth tax or other innovative revenue measures. Today’s oral argument confirmed how misguided that effort was.

The challengers to the tax measure, who want to avoid paying income tax on the profit earned by a foreign corporation they partially own, claim that income may not be taxed until it is “realized” (essentially, received or otherwise directly made use of) by the taxpayer. As the oral argument made clear, however, this case can be resolved without even addressing that question, based on Congress’s longstanding authority to attribute the income of a corporation to its owners.

If the Court does address the question whether income realization is a constitutional requirement, the answer should be clear. Long before the ratification of the Sixteenth Amendment—which restored Congress’s power to tax income in response to an activist and ahistorical Supreme Court decision—Congress repeatedly taxed unrealized gains as income, and the Amendment’s ratifiers understood that the authority to levy such taxes was part of the power they were restoring to Congress.

Our amicus brief for law professors John R. Brooks and David Gamage traced this history, and the challengers had no persuasive response to it at oral argument, even when pressed by Justice Sotomayor on the matter. Solicitor General Elizabeth Prelogar had it right when she explained that the Sixteenth Amendment was meant to restore a preexisting constitutional power, and that the right way to understand the scope of that power is to look at how it was exercised before the Amendment.



Case page in Moore v. United States:


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