TaxProf Blog has important thoughts from tax professors on the Moore v. United States Sixteenth Amendment case:
Lawrence Zelenak (Duke): Moore Thoughts. An excerpt:
In the historical background portion of his opinion, Justice Kavanaugh goes out of his way to disapprove of the Court's 1895 holding in Pollock v. Farmers' Loan & Trust Co., that taxes on the income from property (both real and personal) are direct taxes, and thus invalid under the original Constitution if not apportioned. Kavanaugh writes, "Because income taxes are indirect taxes, they are permitted under Article I, § 8 without apportionment." In his telling, the Sixteenth Amendment simply "confirmed what had been the understanding of the Constitution before Pollock: Taxes on income—including income from property—are indirect taxes that need not be apportioned." Because nothing in the Court's discussion of Pollock ends up mattering for purposes of the Court's analysis of the MRT, the Moore opinion's reaching out to reject of Pollock is puzzling.
Conor Clarke (Washington University): Four More Takeaways from Moore. An excerpt:
The larger issue of “realization” lives to fight another day. As suggested above, Kavanaugh took great pains to note that the Court was only answering a “precise and narrow question.” The wider and more sprawling question was whether—as the famous, controversial, and rather elliptical 1920 case of Eisner v. Macomber is often read to suggest—realization is required for there to be a tax on “incomes” under the Sixteenth Amendment. Many tax-law scholars (including the introductory casebook from which I teach) have long regarded Macomber—and the view that realization is constitutionally required—as an emphatically dead letter. Justice Kavanaugh’s opinion suggests a breath of new life: “We do not decide that question today.”
In addition, no fewer than four Justices have now expressed the view that realization is a constitutional requirement. In a concurring opinion, Justice Barrett (who some thought shared Kavanaugh’s views after argument, and who was joined by Justice Alito), noted her view that a realization requirement flows from the text of the Sixteenth Amendment: That amendment’s “reference to income ‘derived’ from any source,” she wrote, “encompasses a requirement that income, to be taxed without apportionment, must be realized.” In his dissent (joined by Justice Gorsuch), Justice Thomas took the same view—that “[t]he text of the Sixteenth Amendment points to the concept of realization.” The Wall Street Journal editorial page may be disappointed, but the express enthusiasm of these four justices for a constitutional realization requirement—combined with a five-justice majority that expressly declined to reach the issue—is a remarkable sea change for tax law and tax scholarship, which long viewed the issue as settled.
What will it mean? For tax law, it means that constitutional litigation over tax issues is likely continue…
UPDATE: Further at TaxProf Blog, John R. Brooks (Fordham) & David Gamage (Missouri-Columbia): Moore v. United States—Initial Reactions. An excerpt:
The decision was formally 7-2, with Justices Barrett and Alito concurring in the opinion. But in reality it’s a 5-4 decision, since Barrett and Alito along with Thomas and Gorsuch, in dissent, would have held that the Sixteenth Amendment does require realization. Their arguments are rather weak, however, perhaps as result of the strong historical arguments by the government and amici (including us). All nine Justices agree, for example, that the Sixteenth Amendment did not purport to enshrine a new or different idea of “income,” and that the Amendment was narrowly targeted at overruling one of the holdings of Pollock v. Farmers’ Loan & Trust Co. and restoring the pre-1895 income tax power. We have shown that fact unambiguously in our work, but it was not obvious going into the case that this Court would agree. Ironically, given their judicial philosophies, these four Justices instead seem to be making a non-originalist prudential argument that we need some rule to distinguish income from property, and an atextual argument that we should read the word “derived” in the Sixteenth Amendment as a “near-synonym” for “realized” in order to establish realization as such a rule. But they don’t seriously consider alternative tests for income—for example, the simple idea of economic gain between two points in time, as advocated by the government. Nor do they engage with the ample historical evidence that tax law and accounting prior to and contemporaneous with the Sixteenth Amendment frequently treated unrealized gain as “income,” including the corporate income tax in operation at the time of the Amendment’s ratification.
The authors are apparently unaware of the tradition that the title of any posts on Moore v. United States must contain a pun on Moore/more. See also here and here.
Posted at 6:27 AM