This Honorable Court is Now in Session

Allan Rolnick, CPA

For over 234 years, the Supreme Court has issued opinions that have changed the course of our government, our history, and our very American character. In 1803, Marbury v. Madison established the principle of judicial review and cemented the court’s role as a co-equal branch of government. In 1954, Brown v. Board of Education ruled that “separate but equal” was inherently unequal and struck a mortal blow against the evils of Jim Crow. In 1964, New York Times v. Sullivan established that public officials can’t sue for defamation without proving “actual malice.” And in 1924, United States v. Ninety-Five Barrels, More or Less, Alleged Apple Cider Vinegar (a real case), suggests that the Justices, more or less, might even have a sense of humor. The Court rarely hears tax cases. Last week, however, in Moore v. United States, they heard one such dispute that could blow a massive hole in the federal budget. Very briefly (because a deep dive would make your head hurt), it involves whether the government can tax income before a taxpayer actually “realizes” it. Specifically, the plaintiffs, Charles and Kathleen Moore, are challenging a section of the Tax Cuts and Jobs Act of 2017, which imposed a one-time tax on income that U.S. corporations’ shelter in overseas subsidiaries. If the Court rules for the plaintiffs, it could cost the Treasury 340$ billion in tax and topple key pillars of the current code. The Moores own 11% of a company selling agricultural supplies to Indian farmers. They paid $14,729 in taxes under the 2017 law, even though they hadn’t sold their stock or collected any cash dividends.

They sued to get their money back, basing their argument on a 1920 decision, Eisner v. Macomber, holding that “enrichment through increase in value of capital investment is not income in any proper meaning of the term.” Justices Alito and Gorsuch seemed sympathetic to the Moores’ case. The rest ranged from skeptical to hostile. Their main rationale is that our current system taxes “unrealized income” all the time. If you run your business as a partnership or an S corporation, for example, you’ll pay tax on your share of the entity’s income whether it sends you that money or not. As is often the case, there’s a broader agenda hiding under the specific facts here. Several senators led by Bernie Sanders and Elizabeth Warren have proposed a wealth tax equal to 2% of your net worth between $50 million and a billion, and 3% on anything over a billion. Opponents argue that taxing wealth, as opposed to income, violates the same principle. Most observers see Moore as a preemptive strike against future wealth taxes. And nobody takes a $15,000 case all the way to the Supreme Court – there’s always more at stake. You might not think you’re rich enough to worry about a wealth tax. But the first modern income tax, in 1913, didn’t kick in until you made the equivalent of $93,000 in today’s dollars and topped out at just 7% on anything over today’s $15 million. Now look where we are! Today, that wealth tax is still just a bill. (Sittin’ here on Capitol Hill…) There’s no realistic chance it will pass, not as long as there are still Republicans drawing breath, but Uncle Sam likes to spend more than he takes in, regardless of who’s in the White House. So we can still expect to see senators offering more proposals to tax things like carbon emissions, sales, and wealth long into the future. Fortunately, we’ll be here to help you understand whatever new taxes Washington sends our way. We’ll parse the laws that Congress passes and study those boring tax opinions so you don’t have to!

Allan J Rolnick is a CPA who has been in practice for over 30 years in Queens, NY. He welcomes your comments and can be reached at 718-896-8715 or at

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