The Latest from the Prospect
 ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌

 

View this email in your browser

**DECEMBER 6, 2023**

On the Prospect website

Federal Agencies Can Disable Employer Debt TRAPs

Advocacy groups offer a road map for how agencies can use existing
authority to ban contracts that force workers to pay employers if they
leave their job. BY DAVID DAYEN

What We Don't Measure-but Should

The case for GDP plus GDD BY RICHARD PARKER

How Race Bends Science
The
clinical diagnosis of schizophrenia has been applied disproportionately
to Black men, an artifact of a changing culture. BY RAMENDA CYRUS

Kuttner on TAP

****

****

****

****

****

****

****

**** Will the Supreme Court Help the Right
'Starve the Beast'?

Yesterday's oral arguments in the Moore case suggest some sympathy for
a doctrine that could cost the government hundreds of billions in
revenue.

The long-standing goal of the Republican right, in the famous words of
anti-tax activist Grover Norquist, is to starve the beast of the deep
state by denying it revenue. The right may get at least some of its wish
if the Supreme Court sides with the plaintiffs in the case of

**Moore v. United States**.

The technical question before the high court is what exactly it means
for an investment to be "realized," which in simple English seems to
mean cashed in. Thus, a shareholder doesn't pay capital gains tax on
the increased value of a stock or a house until the asset is sold and
converted to cash.

That seems very straightforward. But in practice, there are lots of gray
areas, of which more in a moment.

In 2017, as part of the Tax Cuts and Jobs Act, a bipartisan deal allowed
the government to recoup some of the revenue given away in Trump's tax
cut by going after profits hidden by Americans overseas. The new
provision, called a mandatory repatriation tax, ended the unlimited
deferral from taxation by the U.S. of foreign income kept offshore. The
closing of this loophole was estimated to bring in about $338 billion
over ten years.

In the

**Moore** case, the plaintiffs, Charles and Kathleen Moore, had invested
in a friend's company in India. Their earnings were left in India. But
under the new 2017 law, the IRS taxed them $14,729 on their share of the
profits.

[link removed]

The Moores cited a 1920 Supreme Court case,

**Eisner v. Macomber**, decided just seven years after the 16th
Amendment authorized income taxes, in which the Court held that a gain
in asset value qualifies as taxable income only if it is "received or
drawn" by the investor. However, that earlier ruling was sufficiently
ambiguous that the IRS has been able to tax several forms of income,
even though they are not literally turned into cash.

For instance, partnerships typically leave a portion of income earned by
the partners in the firm, but the IRS has long treated it as taxable
income and that view has never been successfully challenged in court.
Similarly, corporate retained earnings that are not paid out to
investors are still subject to taxation. And under Subpart F, which
dates to 1962, American investors in foreign corporations must pay taxes
on their share of income.

In oral arguments Tuesday, several justices including conservative Amy
Coney Barrett pounced on the inconsistency and asked the counsel for the
Moores, Andrew Grossman, whether they were contending that it was
unconstitutional to tax partnership income or retained corporate income.
Grossman prudently narrowed the argument to just the issue of the 2017
mandatory repatriation tax.

This narrowing could spare government the worst-case scenario, in which
taxation of all such ambiguous categories of income would be found to be
unconstitutional. That would cost an estimated $7 trillion over ten
years. It would also prevent a tax on a billionaire's wealth from ever
being enacted, because taxing net wealth would involve unrealized income
from investments.

Even so, the $338 billion at risk in this case is not pocket change.
Justices Neil Gorsuch and Brett Kavanaugh seemed sympathetic to the
Moores' reading of the 16th Amendment. If it runs true to form, the
Roberts Court could well find for the Moores as a spurious middle
ground.

~ ROBERT KUTTNER

Follow Robert Kuttner on Twitter

[link removed]

There's still time to make a smart gift to TAP! Using this simple
tool, give a tax-savvy gift of stock, make a grant from your
Donor-Advised Fund, or give from your IRA if you're over 70.5. Give
smart now.

To receive this newsletter directly in your inbox, click here to
subscribe. 

Click to Share this Newsletter

[link removed]

 

[link removed]

 

[link removed]

 

[link removed]

 

[link removed]

YOUR TAX DEDUCTIBLE DONATION SUPPORTS INDEPENDENT JOURNALISM

The American Prospect, Inc., 1225 I Street NW, Suite 600, Washington, DC xxxxxx, United States
Copyright (c) 2023 The American Prospect. All rights reserved.

To opt out of American Prospect membership messaging, click here
.

To manage your newsletter preferences, click here
.

To unsubscribe from all American Prospect emails, including newsletters,
click here
.