Calabresi On Moore: Taxes On Wealth And Unrealized Capital Gains Are Unconstitutional

Steven Calabresi (Northwestern), Taxes on Wealth and on Unrealized Capital Gains Are Unconstitutional:

In Moore v. United States, the Supreme Court will decide this year whether the Ninth Circuit was right in upholding as constitutional taxes on unrealized capital gains and wealth taxes.  Ed Meese, Gary Lawson, and I have written an amicus brief filed by Philip Williamson urging the Supreme Court to overrule the Ninth Circuit on both points.  Our brief presents the original public meaning of the Sixteenth Amendment and of the requirement that direct taxes be apportioned among the States.  We urge the Supreme Court to ignore bad caselaw and to stick to the original public meaning of the constitutional text.

The Sixteenth Amendment authorizes Congress to tax "incomes, from whatever source derived" without apportionment among the states. Unrealized capital gains are neither "incomes" nor "derived" within the original meaning of the Amendment. Both popular and legal dictionaries from the years around the ratification of the Sixteenth Amendment confirm that point. So does the amendment's context. and the Supreme Court's near-contempraneous decision in Eisner v. Macomber. All evidence demonstrates that the original meaning of the Sixteenth Amendment is the commonsense one: realization is a precondition for income; money must come into the hands of a taxpayer in order to be taxable "income." ...

A tax on the Moores' unrealized gain in wealth cannot be considered an indirect duty, impost, or excise. Rather, it is a direct tax. And that requires an apportionment among the several states according to the census, unless excused from apportionment by the Sixteenth Amendment—which it is not.

For these reasons, the direct tax assessed on the Moores' unrealized capital gains  is unconstitutional.

Prior TaxProf Blog coverage:

• Christopher Cox (Former Rep. (1989-2005) & SEC Chair (2005-2009)) & Hank Adler (Chapman), The Ninth Circuit Upholds A Wealth Tax (Jan. 30, 2023)
• Reuven Avi-Yonah (Michigan), If Moore Is Reversed, 179 Tax Notes Fed. 2215 (June 26, 2023)
• John Brooks (Fordham) & David Gamage (Indiana), Moore v. United States and the Original Meaning of Income (June 27, 2023) (reviewed by Michelle Layser (San Diego) here)
• Daniel Hemel (NYU), The Low And High Stakes Of Moore, 180 Tax Notes Fed. 563 (July 24, 2023) (reviewed by Young Ran (Christine) Kim (Cardozo) here)
• Alex Zhang (Emory), Moore, Eisner v. Macomber, and the Future of Structural Tax Reform, 92 Geo. Wash. L. Rev. __ (2024) (Aug. 29, 2023)
• Thomas Lee (BYU), Lawrence Solum (Virginia), James Cleith Phillips (Chapman) & Jesse Egbert (Northern Arizona), Moore, Corpus Linguistics, And The Original Public Meaning Of The Sixteenth Amendment (Sept. 14, 2023)
• Christopher Hanna (SMU), Moore, The 16th Amendment, And The Underpinnings Of The TCJA’s Deemed Repatriation Provision (Sept. 28, 2023)
• Joint Committee on Taxation, Tax Code Provisions Implicated In Moore (Oct. 5, 2023)
• Natasha Sarin (Yale), The Supreme Court Tax Case That Could Blow A Hole In The Federal Budget (Oct. 7, 2023)
• John Brooks (Fordham) & David Gamage (Indiana), “From Whatever Source Derived”: The Sixteenth Amendment and Congress’s Income Tax Power (Oct. 9, 2023)
• Reuven Avi-Yonah (Michigan), Moore Questions Than Answers, 180 Tax Notes Fed. 2256 (Oct. 10, 2023)
• Steven Rosenthal (Tax Policy Center), Moore Could Invalidate Decades Of Tax Rules, 181 Tax Notes Fed. 285 (Oct. 10, 2023)
• Lawrence Zelenak (Duke), Reading The Taxpayers’ Brief In Moore (Oct. 18, 2023)
• NYU Tax Law Center, Guide To Moore (Oct. 25, 2023)
• Blaine Saito (Ohio State), Review Of  “From Whatever Source Derived”: The Sixteenth Amendment and Congress’s Income Tax Power, by John Brooks (Fordham) & David Gamage (Indiana) (Oct. 27, 2023)
• Tax Prof Amicus Briefs In Moore v. United States: 22 For Government, 1 For Taxpayer (Oct. 31, 2023)