Freedom

Story by Kris Lippi 

The U.S. Supreme Court is currently at the center of a landmark case, Moore v. United States, which could severely impact the nation’s tax landscape. The case, seemingly centered on the taxation of unrealized foreign gains, has considerable consequences that extend to wealth taxation. 

The outcome of this case might redefine what Congress can or cannot tax, most notably concerning wealth.

Inflation, Wealth Preservation, and the Government’s Response

In a recent YouTube video, financial commentator Peter Schiff talked about the relevance of the Supreme Court case in the context of inflation and wealth preservation. Schiff emphasizes the importance of owning real assets as a refuge against the inflation tax. 

This will allow individuals to preserve their wealth in the face of diminishing currency value. The government’s attempt to tax unrealized gains in any asset raises concerns about potential threats to personal wealth.

The commenters on the video have worries of their own about this topic: “Great show Peter. I hope TSC doesn’t vote on taxation for people’s property and accrued value on their homes, gold, stocks and other properties. It will be a BIG mess.”

Another one weighed in with their own thoughts: “I appreciate you Peter. Pretty scary what you brought up about Moore V. U.S. government potentially being a backhanded way of nationalizing assets. Even more reason to own physical gold.”

Schiff draws attention to the strategy of holding onto real assets during inflation, ensuring that the assets’ value is preserved as the value of money declines. He explains that while asset prices may increase during inflation, owning real assets helps individuals dodge the inflation tax. 

However, Schiff raises a red flag regarding the government’s potential move to tax unrealized gains as income. He argues this could lead to widespread taxation on appreciated assets, which would fundamentally challenge the concept of wealth preservation.

Another commenter added some extra context that could be relevant depending on what state you live in: “The gov. already does this to some extent. In TX property tax on your house is based on the estimated value. So if a house goes from 500k to 5M, the property taxes could become unaffordable for many. I think there’s a limit on how much it can go up in any one year, but it would still be a problem. Inflation that bad would mean we won’t be able to buy food, forget paying taxes.”

The Supreme Court Case: Moore v. United States

Let’s take a deeper look at the case itself. The case involves the Moores, who challenge the constitutionality of a mandatory repatriation tax introduced by the 2017 Tax Cuts and Jobs Act. The tax aims to prevent windfalls on undistributed offshore earnings, and the plaintiffs argue that taxing unrealized gains is unconstitutional. 

The lower courts ruled against the Moores, highlighting the constitutionality of taxes similar to the mandatory repatriation tax. The important question here is whether income must be realized to be taxable under the Constitution.

During the Supreme Court oral arguments, justices explored historical definitions, the nature of direct and indirect taxes, and the absence of the term “realization” in the 16th Amendment. Concerns were raised about the potential implications of the petitioner’s argument and the need to define income in a new way. 

Some see the case as a preemptive strike in the broader tax policy battle. It has the power to impact tax policies for multinational corporations and the wealthy, including proposed billionaire taxes.

The outcome of the Moore case could influence tax policies, with potential repercussions on personal freedom and economic stability. If the Court rules in favor of the government, allowing taxation on unrealized gains, it could grant Congress seemingly unlimited power to tax wealth. 

Critics argue that this could pave the way for a significant erosion of personal wealth and freedoms, with the government gaining unprecedented authority to tax any appreciation in assets.

Unanswered Questions and Future Scenarios

As the Supreme Court deliberates, we are left wondering about potential confusion, taxpayer disputes, corporate tax refunds, and the U.S. Treasury’s revenue implications. 

Supporters of the Moores’ contention hope for a ruling that prevents Congress from having unchecked power to tax, while opponents fear the destabilizing consequences of limiting the government’s ability to tax unrealized gains.

Whatever happens, it is safe to say that the Supreme Court’s decision in Moore v. United States has the potential to shape the future of wealth taxation in the United States. 

It poses significant ramifications for personal wealth, freedom, and the overall economic landscape. While we are all waiting for the Court’s decision, individuals, policymakers, and financial experts closely monitor the potential outcomes and their subsequent impact on the nation’s tax policies and economic well-being.

What are your thoughts? How might the Supreme Court’s decision on taxing unrealized gains impact individuals’ incentives to invest and hold onto assets in the face of inflation?

In the context of wealth preservation, do you believe taxing unrealized gains as income could discourage long-term investment strategies and asset retention?

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We’ll end this with another YouTube comment on Peter Schiff’s video, describing the aftermath of France’s solidarity taxes on wealth: “That wealth tax exists in my home country (France). It led to the exodus of an estimated 12,000 millionaires between 2000 and 2016. Now France has the worst deficit in all of Europe. In 2018, Macron didn’t have the guts to fully abolish it so he turned it into a tax on real estate property valued above €1.3M. But the damage has been done and rich French people and entrepreneurs have left that sinking ship of a country”