Taxing you on income never received, Moore v. United States

[johnwk]

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See: An Unconstitutional Income Tax Without Income

"Can the government impose an income tax when you never had income? That may seem like a trick question, but it’s exactly what happened to Charles and Kathleen Moore."

......snipped for brevity....

Now the Moores have petitioned the Supreme Court to take their case, and the Cato Institute has filed an amicus brief supporting that petition."


This case may inspire our Supreme Court to, once and for all, address what is, and what is not, a direct tax, which still to this very day requires apportionment.

It may also inspire our Supreme Court to re-confirm the meaning of "incomes" as found in the Sixteenth Amendment, which was elaborated upon in EISNER v. MACOMBER , 252 U.S. 189 (1920)


"After examining dictionaries in common use (Bouv. L. D.; Standard Dict.; Webster's Internat. Dict.; Century Dict.), we find little to add to the succinct definition adopted in two cases arising under the Corporation Tax Act of 1909 (Stratton's Independence v. Howbert, 231 U.S. 399, 415 , 34 S. Sup. Ct. 136, 140 [58 L. Ed. 285]; Doyle v. Mitchell Bros. Co., 247 U.S. 179, 185 , 38 S. Sup. Ct. 467, 469 [62 L. Ed. 1054]), 'Income may be defined as the gain derived from capital, from labor, or from both combined,' provided it be understood to include profit gained through a sale or conversion of capital assets, to which it was applied in the Doyle Case, 247 U.S. 183, 185 , 38 S. Sup. Ct. 467, 469 (62 L. Ed. 1054). Brief as it is, it indicates the characteristic and distinguishing attribute of income essential for a correct solution of the present controversy."

JWK

If, by calling a tax indirect when it is essentially direct, the rule of protection [apportionment] could be frittered away, one of the great landmarks defining the boundary between the nation and the states of which it is composed, would have disappeared, and with it one of the bulwarks of private rights and private property. POLLOCK v. FARMERS' LOAN & TRUST CO., 157 U.S. 429 (1895) JUSTICE FULLER

 

[acptulsa]

......snipped for brevity....

You snipped away the steak but left the bone, "for brevity". Some people like to know what they're mad about before they go off on a tear.

In 2006, the Moores invested in a start‐​up Indian company called KisanKraft, whose goal was to provide low‐​cost, efficient tools to rural Indian farmers. The Moores believed in KisanKraft’s mission and retained their shares of KisanKraft for over a decade, never selling it for a profit. And KisanKraft reinvested all of its own profits in the company, never paying dividends. For that reason, the Moores never saw a dollar from their investment.

Yet in 2017, the Moores suddenly received a hefty federal tax bill for their ownership stake in KisanKraft. How could that be, if they never earned any money from their holdings? The reason is a provision of the 2017 Tax Cuts and Jobs Act called the Mandatory Repatriation Tax. For U.S. taxpayers who met a certain minimum threshold of ownership in certain foreign corporations, the Mandatory Repatriation Tax imposed a tax bill as if those taxpayers had earned a 2017 dividend from the corporation for profits going back years. Because the Moores owned roughly 13 percent of KisanKraft shares, they were taxed as if KisanKraft had paid them a 2017 dividend worth 13 percent of KisanKraft’s earnings since 2006. Even though that 2017 dividend was fictional, their tax bill was very real.

 

[pmbug]

I hope SCOTUS takes up this case. I wonder if the case might shed light on the proper tax treatment for crypto staking rewards. Crypto staking rewards are earned as the underlying crypto and aren't realized as profit/income unless the crypto is sold. At least, that's how I see it.

 

[acptulsa]

...unless the crypto is sold.

Are you sure the verb isn't "spent"? It is a currency. That seems to be the thinking the government is using, even as they deny it's legal tender.

Shall we compromise and say, "traded"?

 

[johnwk]

Judge Gould's opinion in Moore v. United States has a major defect.​

You snipped away the steak but left the bone, "for brevity". Some people like to know what they're mad about before they go off on a tear.

But I did provide a link for those interested in the subject. Aside from that, there is a glaring flaw in Circuit Judge Gould’s (U.S. Court of Appeals for the Ninth Circuit) WRITTEN OPINION

Judge Gould writes:

I. The MRT does not violate the Apportionment Clause

The Constitution’s Apportionment Clause provides that “No Capitation, or other direct, Tax shall be laid, unless in Proportion to the Census or Enumeration herein before directed to be taken.” U.S. CONST. art. I, § 9, cl. 4. “This requirement means that any ‘direct Tax’ must be apportioned so that each State pays in proportion to its population.” NFIB, 567 U.S. at 570. The Apportionment Clause traditionally applied to only capitations1 and land taxes. See id.at 571 (“[D]irect taxes, within the meaning of the Constitution, are only capitation taxes, as expressed in that instrument, and taxes on real estate.” (quoting Springer v. United States, 102 U.S. 586, 602 (1881))).


Judge Gould citing Springer v. United States as a source of authority with regard to the meaning of a “direct tax” as the phrase appears in our federal Constitution, and as understood by those who framed our Constitution and participated in its ratification process, is fundamentally and fatally flawed! That fatal flaw is found in Justice Swayne’s own words who delivered the written opinion in Springer v. United States. Justice Swayne states:

"The very elaborate researches of the plaintiff in error have furnished us with nothing from the debates of the State conventions, by whom the Constitution was adopted, which gives us any aid. Hence we may safely assume that no such material exists in that direction . . . "

Well, that safe assumption was factually wrong! In fact, there is sufficient evidence in the State ratification debates of our Founders which articulate the identifying characteristics which distinguish a direct tax from one which is indirect.

As an advocate in adopting the Constitution, James Wilson (who was a prominent delegate to the Constitutional Convention) pointed out during Pennsylvania’s ratification debates that:

“In this Constitution, a power is given to Congress to collect imposts [an indirect type of tax], which is not given by the present Articles of Confederation. A very considerable part of the revenue of the United States will arise from that source; it is the easiest, most just, and most productive method of raising revenue; and it is a safe one, because it is voluntary. No man is obliged to consume more than he pleases, and each buys in proportion only to his consumption." Elliots VOL II, page 467, Wilson

And this very characteristic identifying an indirect tax as a voluntary payment when buying articles of consumption, is again articulated, and more in depth during the Connecticut State Ratification debates by Oliver Ellsworth, who provides the following characteristics distinguishing a direct tax from one which is indirect.

January 7, 1788. [On this Power of Congress to lay Taxes.]

”Direct taxation can go but little way towards raising a revenue. To raise money in this way, people must be provident; they must constantly be laying up money to answer the demands of the collector. But you cannot make people thus provident. If you would do any thing to the purpose, you must come in when they are spending, and take a part with them. This does not take away the tools of a man’s business, or the necessary utensils of his family: it only comes in when he is taking his pleasure, and feels generous; when he is laying out a shilling for superfluities, it takes twopence of it for public use, and the remainder will do him as much good as the whole.”

Ellsworth goes on to note:

“The experiments, which have been made in our own country, show the productive nature of indirect taxes. The imports into the United States amount to a very large sum. They never will be less, but will continue to increase for centuries to come. As the population of our country increases, the imports will necessarily increase. They will increase, because our citizens will choose to be farmers; living independently on their freeholds, rather than to be manufacturers, and work for a groat a day.”

”On the other hand, direct taxes are not voluntary, nor, in general, are they avoidable. And with respect to direct taxes, the anti-federalist minority of the Convention of Pennsylvania warned that direct taxation “…is a tax that, however oppressive in its nature, and unequal in its operation, is certain as to its produce and simple in its collection; it cannot be evaded like the objects of imposts or excise …” ___ See Connecticut ratification debates Elliot’s VOL II, page 191, Ellsworth

So, a few characteristics which define an indirect tax are, it is voluntarily paid during the taxpayer’s consumption, and safe because no man is obliged to consume more than he pleases, and such a tax are costs added by government to things which individuals are free to acquired or reject, while direct taxes are those which are assessed to the individual by government, are oppressive, and not avoidable.

The bottom line is, to cite Springer v. United States as an authority to identify a direct tax, within the meaning of our Constitution, is to totally ignore our Founders’ articulated identifying characteristics which actually define and distinguish a direct tax from one which is indirect, and thus, deprives the people the intended protection requiring any direct tax to be apportioned.


JWK

If, by calling a tax indirect when it is essentially direct, the rule of protection [apportionment] could be frittered away, one of the great landmarks defining the boundary between the nation and the states of which it is composed, would have disappeared, and with it one of the bulwarks of private rights and private property. POLLOCK v. FARMERS' LOAN & TRUST CO., 157 U.S. 429 (1895) JUSTICE FULLER

 

[pmbug]

Are you sure the verb isn't "spent"? ...

traded, spent, sold - call it what you will, the IRS treats crypto like an asset and wants it's cut of any capital gains.

 

[Sonny Tufts]

Following the three-judge panel's opinion the Moores asked for an en banc hearing (one heard by all of the 9th Circuit judges), but this was denied. Four judges dissented from this denial, and argued that realization is required for income to be taxed. Their dissent can be read here: https://cei.org/wp-content/uploads/2022/11/Moore-En-Banc-Denied.pdf

Given that SCOTUS has repeatedly said that realization isn't constitutionally required, I think this argument is a loser. There are several instances where the owners of a business conducted through an entity are taxed on the entity's income regardless of whether the owners ever receive a distribution -- partnerships and S corporations are prime examples. In addition, original issue discount is taxed. For example, if someone buys a bond for $2500 that will mature in the future and pay the holder $10,000 the annual increase in the bond's value is includable in income even though this increased value isn't realized.

Having said that, I always get heartburn when Congress passes retroactive tax legislation. But I admit to being unfamiliar with Subpart F and the taxation of controlled foreign corporations and their shareholders, so I will resist pontificating about something that I know nothing about. Given the precedents upholding retroactive tax legislation, however, my hunch is that this argument won't fly, either. But there may be other aspects of the case that could require reversal.

 

[oyarde]

So you want to know if the govt can tax you on what they wish ? The answer is yes. Next question .

 

[PAF]

So you want to know if the govt can tax you on what they wish ? The answer is yes. Next question .

I read the very first line of the OP, and then the very last line of the thread (until my post), and came to this conclusion:

The Will of the People, most People be like: "I don't mind paying taxes."

 

[oyarde]

I read the very first line of the OP, and then the very last line of the thread (until my post), and came to this conclusion:

The Will of the People, most People be like: "I don't mind paying taxes."

I think it could be even worse , most dont even know all the taxes they pay. I make a point to avoid any I can

 

[johnwk]

Landmark Legal Foundation files brief supporting Mr. and Mrs. Moore

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I see the Landmark Legal Foundation has also filed an AMICUS CURIAE BRIEF in support of Mr. and Mrs. Moore

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BTW, here is a great video in which the Moores explain their fight, a fight for truth, justice and the American Way!

 

[Sonny Tufts]

I think the brief would have been more effective if it had squarely addressed and attempted to distinguish the situations in which unrealized gains are taxed, such as original issue discount and the requirement that securities dealers use mark-to-market accounting. If SCOTUS agrees to hear the case it’s certain that the Moores’ appellate counsel will be grilled on these matters.

 

[johnwk]

Eight groups give thumbs up to having the US Supreme Court review Moore v. United States

I think the brief would have been more effective if it had squarely addressed and attempted to distinguish the situations in which unrealized gains are taxed, such as original issue discount and the requirement that securities dealers use mark-to-market accounting. If SCOTUS agrees to hear the case it’s certain that the Moores’ appellate counsel will be grilled on these matters.

SEE: Eight Groups Support Supreme Court Consideration of Moore v. United States

The Moores’ Supreme Court challenge to an unprecedented tax—a tax which the government labels a income tax, but is actually a property tax—received a major boost on Monday. Eight different organizations filed briefs in support of Supreme Court consideration of the Moores’ case.

Here are some excerpts from those briefs: