WASHINGTON ― The Democratic dream of new taxes on accumulated wealth is still alive thanks to a semi-friendly Supreme Court decision.
Big-money groups that backed a legal challenge to part of a 2017 tax law had hoped the high court would take the opportunity to ban wealth taxes as proposed by Democrats like Sen. Elizabeth Warren (D-Mass.).
“It’s no surprise that when the Supreme Court follows the law that we can actually do the things we need to do to make this country run,” Warren told HuffPost on Thursday.
The ruling in the case, Moore v. United States, which looked at a one-time tax on capital gains in certain foreign investments, did not say whether a wealth tax would be constitutional, leaving the question for another day. Warren and Sen. Ron Wyden (D-Ore.), the Senate Democrats’ point man on tax policy, called it a good outcome.
“It certainly sounds helpful to our position that billionaires should have to pay a fair share of taxes like everybody else,” Wyden said.
“The Supreme Court’s job is not to go beyond the confines of the particular opinion in front of them,” Warren said. “But they certainly backed up from cutting off a wealth tax before it could ever get started.”
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Warren has led Democrats in their pursuit of new taxes on the wealth of the super-rich. As it stands, the tax code takes an annual cut of people’s income and only taxes assets when they’re sold for a profit, whereas a wealth tax would target someone’s accumulated assets every year, an idea that some legal scholars have said would be unconstitutional.
The share of total assets owned by the richest 1% of Americans has risen from 20% in 1990 to more than 27% as of this year, according to Federal Reserve data, while the bottom half of households own less than 6% of assets. Democrats have lamented the way wealthy people can borrow against their assets and avoid taxes when they transfer them to their children.
Warren’s “Ultra-Millionaire Tax Act” would impose a 2% levy on households and trusts worth more than $50 million and a 3% tax on households worth more than $1 billion.
“One of the fairest ways that would raise the most revenue is a two-cent tax on billionaires,” Warren said. “The idea that the top 1/10 of 1% pays about 3.4% of their total wealth every year in taxes and that the 99% pays more than double that — it’s just not sustainable. America is not a country of kings and queens. It’s a country of ‘everybody pays a fair share.’”
A Washington couple named Charles and Kathleen Moore sued over a tax they paid based on their ownership of a stake in a foreign company after a 2017 tax law required a one-time tax on certain American shareholders in American-controlled foreign corporations. The Moores’ attorneys said in the Wall Street Journal that they hoped the case would “slam shut the door on a federal wealth tax like the one Sen. Elizabeth Warren wants to enact,” because, they argued, the tax on the Moores’ “unrealized” capital gains was similar to what Warren and others have in mind for billionaires’ assets.
The court did not slam the door shut on Warren’s proposal, but it didn’t give it a green light, either.
“Nothing in this opinion should be read to authorize any hypothetical congressional effort to tax both an entity and its shareholders or partners on the same undistributed income realized by the entity,” the Supreme Court decision said. “Nor does this decision attempt to resolve the parties’ disagreement over whether realization is a constitutional requirement for an income tax.”
