Supreme Court dismisses challenge to Biden’s ‘wealth tax’ proposal
The Supreme Court on Friday dismissed a legal challenge against the mandatory repatriation tax included in the 2017 corporate tax reform. This tax was contested for its constitutionality by critics. This Supreme Court ruling reaffirms the government’s authority to impose a mandatory repatriation tax, ending legal disputes surrounding this component of the 2017 tax reform. The tax, which aimed at encouraging corporations to repatriate money held overseas by taxing those earnings at a one-time reduced rate, has since been a contentious issue, with critics arguing that it oversteps constitutional bounds.
Supporters of the tax, however, argue that it is necessary for leveling the playing field and bringing corporate profits back to the U.S. marketplace, reflecting broader efforts by the government to reform corporate taxation practices and curb tax avoidance strategies.
The dismissal of the challenge by the highest court in the land officially puts an end to the constitutional debate, allowing the government to fully implement and enforce the tax as part of its broader economic and fiscal strategy. This decision is likely to impact future policy making and how businesses manage their overseas earnings.
The Supreme Court on Friday rejected a challenge to the constitutionality of the mandatory repatriation tax, a provision of the 2017 corporate tax reform law that critics have dubbed the Biden administration‘s “wealth tax.”
The 7-2 decision by Justice Brett Kavanaugh upheld the tax, which imposes a one-time levy on undistributed profits from U.S. shares of foreign corporations majority-owned by Americans.
“The question is whether that 2017 tax (known as the Mandatory Repatriation Tax or MRT) is constitutional under Article I, §§8 and 9 and the Sixteenth Amendment. This Court’s longstanding precedents establish that the answer is yes,” Kavanaugh wrote.
The decision stems from a case known as Moore v. United States brought by Charles and Kathleen Moore, a Washington state couple who argued that the $15,000 increase in their tax bill, due to the tax, was unconstitutional because it taxed unrealized income.
The Court’s majority sided with the Biden administration, which primarily argued that the Sixteenth Amendment permits Congress to tax income that foreign corporations actually received, even if it was attributed to U.S. shareholders.
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This decision supports the government’s position that the mandatory repatriation tax is a legitimate means of preventing U.S. shareholders from avoiding taxes by stashing profits in foreign corporations.
During oral arguments in the case, U.S. Solicitor General Elizabeth Prelogar contended that maintaining the corporate tax reform law would avert disruptions to the tax code and avoid what the government warned could be “several trillion dollars” in lost revenue.
This is a developing story and will be updated.
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