Founders of growing companies and investors in successful businesses will be forgiven if they didn't notice a Supreme Court ruling Thursday that could eventually affect their finances all the same. The high court declined to hear a case that focused on a marginal legal question applicable to relatively few people with foreign investments. But the decision also carried potentially costly consequences for many more, as it effectively shut down a legal attempt to pre-emptively derail Democrats' future plans to impose a wealth tax package, whose early proposals include broadening taxable income to appreciated investments that have yet to pay out profits or dividends.
The ruling involved a 7-2 majority of justices refusing to hear Moore v. United States , a case challenging the constitutionality of an element in the Trump-era 2017 Tax Cuts and Jobs Act. At issue was whether a one-time tax could be levied on Americans whose foreign investments had appreciated in value, but not yet produced "realized" income--that is, profits or dividends that they were paid.
But in rejecting the petition and upholding the legality of the contested tax, the Supreme Court declined to address what for most observers call the critical question in the case: whether unrealized gains could be taxed as income. As currently interpreted under the 16th Amendment--the 1913 addition to the Constitution that established a federal income tax--investments whose value increase on paper have been protected from taxa.
