Paul L. Caron
Dean





Saturday, November 25, 2023

Calabresi: Amar Brothers' Moore Amicus Brief Ignores Constitution's Plain Meaning To Justify Taxing Unrealized Gains

Steven Calabresi (Northwestern), The Amar Brief in Moore v. United States Should Not be Embraced:

On December 5, 2023, the Supreme Court will hear oral argument in the most important federalism case since it upheld the constitutionality of President Obama's Affordable Care Act.  The case at issue – Moore v. United States – raises two vital matters:
1. Can Congress tax unrealized capital gains, as Yale Law Professor Bruce Ackerman argues in an amicus brief;
2. Can Congress enact a Bernie Sanders/Elizabeth Warren-style wealth tax, including on unrealized capital gains, as the two Amar brothers (Akhil Reed Amar [Yale] and Vikram David Amar [UC-Davis]) argue?

Because of the huge importance of this case, I am going to respond in this blog post to the Amar brothers (one of whom is my second-best friend in the world, notwithstanding our disagreement in this case). They devoted the third section of their amicus brief to critiquing an amicus brief that I co-filed in Moore arguing against congressional power to impose a wealth tax or to tax unrealized capital gains – a brief which was joined by former Attorney General Edwin Meese III and by Professor Gary Lawson. ...

Article I, Section 9, Clause 4 ... critically limits the federal taxing power by saying that:
"No Capitation, or other direct, Tax shall be laid, unless in Proportion to the Census or Enumeration herein before directed to be taken."

The rule of apportionment thus applies to "direct taxes"; the rule of uniformity applies only to such indirect taxes as "Duties, Imposts, and Excises.

The flaw in the Amar brothers' brief that I will discuss today is that it construes the text of the Constitution according to the expected applications of certain historical figures rather than its plain objective meaning. The Amar brothers rewrite Article I, Section 9, Clause 4 to say:
"No Capitation, or Land Tax shall be laid, unless in Proportion to the Census or Enumeration herein before directed to be taken."

They argue that wealth taxes and taxes on unrealized capital gains in your house or Vanguard fund are perfectly constitutional. They say, contrary to the text of the Constitution, that Article I, Section 9, Clause 4 bans only federal capitation and land taxes and that nothing else is a direct tax.

The original public meaning of the words "direct tax" is clearly set forth in two law review articles: Robert Natelson, What the Constitution Means by "Duties, Imposts, and Excises"— and "Taxes" (Direct or Otherwise), 66 Case W. Res. L. Rev. 297 (2015), and Erik M. Jensen, The Apportionment of "Direct Taxes": Are Consumption Taxes Constitutional?, 97 Colum. L. Rev. 2334 (1997).  Both authors conclude that "direct taxes" included many more taxes than merely a capitation or federal land tax. ...

In 1787, people held their wealth in land because there was no stock market or bond market yet and few banks.  It is thus not surprising that Hamilton and Chase in 1796 would read broad constitutional language like "direct taxes" as applying only to capitation and "land" taxes.  A wealth tax today would fall "straight; and not crooked" upon one person in exactly the same way a capitation or a land tax would have done in 1787.

In sum, Professor Amar's broad readings of the Commerce Clause, the Necessary and Proper Clause, the First Amendment, and the Fourteenth Amendment all suggest a broad reading of the requirement that the words "Direct Taxes" impose today.  That clause thus, in 2023, applies to a wealth tax as well as to a federal capitation or land tax.  Such taxes are subject to the rule of apportionment and not of uniformity.

Prior TaxProf Blog coverage:

https://taxprof.typepad.com/taxprof_blog/2023/11/amar-brothers-moore-amicus-brief-ignores-constitution-plain-meaning-to-justify-taxing-unrealized-gains.html

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