Well, the 9th Circuit. But with one or two more Democrat appointments to the Supreme Court, this will be the law of the land

9th Circuit Appellate Court upholds a wealth tax

The 16th Amendment authorizes the federal government only to tax income, but some members of Congress would love to tax wealth as well. That is widely understood to be unconstitutional, but a recent ruling from the Ninth U.S. Circuit Court of Appeals upholding a form of wealth tax could upend that conventional wisdom if it is allowed to stand.

The case, Moore v. U.S., involves a unique provision of the 2017 Tax Cuts and Jobs Act, which imposed a one-time retroactive tax applicable to individual U.S. shareholders of foreign corporations. Under previous law, U.S. taxpayers had to pay taxes on overseas corporate income when that income was repatriated to the U.S. in the form of dividends. The 2017 act abolished the tax on overseas income, bringing the U.S. tax system into line with those of most other developed countries. But it also created a “mandatory repatriation tax” on the corporation’s undistributed income since 1986, payable not by the corporation but its shareholders.

The result was that without selling their stock or receiving a dividend, U.S. investors were deemed to have received “income” and suddenly became liable for the new tax.

The plaintiffs are a couple, Charles and Kathleen Moore, who purchased 11% of a small foreign corporation in 2005. The Moores were passive investors, never participating in management of the corporation. The corporation never paid dividends. More than a decade after their investment, they suddenly became liable for a hefty tax bill under the new law, which applied to any shareholder with an interest of more than 10%.

The Ninth Circuit’s three-judge panel ruled that it didn’t matter that the Moores never received any money from their investment. A dividend, stock sale or other realization event wasn’t necessary, the court said, because there is “no set definition of income under the Sixteenth Amendment.” That is a remarkable concept: The operative word in a key provision of the Constitution has no fixed meaning. The ruling upends a bedrock principle of taxation, which is that to create taxable income, there must be a transaction, or “realization.” That’s what distinguishes an income tax from a tax on property or wealth.

…. Much hangs on the future of this case. If Moore is allowed to stand, Congress would have a green light to tax every U.S. investor in a domestic corporation in the same way. There would be no constitutional bar to requiring that shareholders pay income tax on their proportionate share of accumulated and undistributed earnings of every corporation in which they, or even their 401(k) plan, hold stock.

That isn’t all. With Moore as precedent and no realization requirement to bound the meaning of “income,” Congress could extend the income tax to include unrealized asset appreciation of any kind. Stamp collections, coin collections, art on the living-room wall—all suddenly would be sources of “income” without yielding the taxpayer a cent. What’s more, since appreciation, unlike realization, is a constantly changing process, the frequency of measurement of the “income” would be at the whim of Congress and the Internal Revenue Service.

…

What if [the Supreme Court] declines to hear the appeal? The Ninth Circuit’s dissenters answered that question: “Divorcing income from realization opens the door to new federal taxes on other types of wealth without the constitutional requirement of apportionment.”

Sooner, not later, local, state and federal governments are going to have to come up with the cash to fund their wild spending. Connecticut’s already started the process, and Congress has, too, as seen in this case. And when they run out of rich people’s money, they’ll just lower their aim to the middle class.

Here’s what one of our new rulers, Bill Gates, had to say yesterday about his view of “equity”. He makes no mention of giving up his own or his fellow Oligarchs’ wealth, naturally, no whether they’ll be eating bugs with the rest of us.

"I tend to see China's rise as a huge win for the world," Gates said. "I mean, that's 20% of humanity. They today match their portion of the global economy, and their portion of the global population match exactly, you know, countries like Australia, U.S., we have per capita GDP's five times what the Chinese have. So we have a disproportionate share of the world's economy."