Opinion | Is the Supreme Court Going to Blow Up Our Tax System?
The three justices appointed by Donald Trump confront a moment of truth on Tuesday, with a case that not only threatens our tax system but our democracy.
In Moore v. United States, the Supreme Court will hear arguments from lawyers for the super-rich who contend that all forms of wealth taxation are unconstitutional. The case involves a narrow provision in the Republicans’ 2017 tax overhaul, requiring payment on certain forms of wealth held abroad. When right-wing groups brought their case before the lower federal courts, they used this provision as a platform for a challenge to the very legitimacy of wealth taxation. In response, the 9th Circuit summarily dismissed their sweeping attack and upheld the constitutionality of the 2017 provision.
Nevertheless, the Supreme Court has decided to take the case, leading thoughtful commentators to worry that it would try to block any future Congress from passing a statute requiring multimillionaires to pay a progressive wealth tax.
If the Trump appointees join a conservative majority to blow up the existing constitutional consensus, however, they will be turning their backs on the passionate defenses of originalism they made before the Senate Judiciary Committee. They will also be raising fundamental questions about their commitment to democratic principles: What gives nine unelected justices the authority to protect the rich when a democratically elected president and Congress decide that progressive taxation is in the public interest?
When it comes to adhering to originalist principles, the history is clear — as long as it’s not cherry-picked.
Quite simply, the Founders were not opposed to wealth taxes. Indeed, the Supreme Court unanimously approved the first wealth tax in 1793. Its successors consistently followed this precedent over the next century and upheld every tax statute that required the rich to pay more than the poor. Given these historical foundations, the Trump-appointed justices will destroy the credibility of their professed commitment to originalism if they vote to prohibit a wealth tax.
The opponents of wealth taxation in Moore try to counter this reality by relying on a single Supreme Court decision, Pollock v. Farmers' Loan & Trust Co, decided in 1895. By a vote of 5 to 4, the Pollock majority overruled all previous Supreme Court precedents and struck down a statute that required the rich to pay income taxes but exempted Americans earning lower salaries.
Pollock’s break with a century of precedent provoked widespread shock and outrage. Within three years, Congress enacted another progressive tax — this one on inheritances. In doing so, it directly challenged the five conservative judges to reconsider their precedent-shattering position: Would they retreat in response to public opinion and acknowledge their blunder in Pollock by upholding the new statute even though it explicitly taxed inherited wealth?
In 1900, the Supreme Court provided a complicated answer to this question in Knowlton v. Moore. On the one hand, all nine justices upheld the inheritance tax, despite its obvious inconsistency with Pollock’s repudiation of wealth taxation. On the other hand, Knowlton refused to admit that Pollock was wrongly decided — and continued to treat the case as a valid precedent.
The public was not impressed. To the contrary, Knowlton convinced the congressional leadership that there was only one realistic way to override continuing judicial opposition and that was to enact a formal constitutional amendment repudiating Pollock. Since Knowlton had unanimously upheld a wealth tax on inheritances, however, the drafters of the amendment believed that it was only necessary to state that the national government had the power “to lay and collect taxes on incomes, from whatever source derived.” They then devoted their time and energy to gaining the bipartisan support required to get two-thirds of the House and Senate to approve the income tax amendment.
Once they achieved this feat in 1909, they faced an even more formidable obstacle course since congressional proposals require ratification by a super-super-majority of three-fourths of the states before they are added to the Constitution and become the “supreme law of the United States.” Still, a nationwide grassroots movement successfully gained the requisite approval of 36 states within the space of four years. The 16th Amendment made it clear that the Supreme Court should never again look upon Pollock as a valid precedent for vetoing statutes passed by Congress that required the rich to pay more taxes than the middle and working classes.
On Dec. 5, 2023, the Supreme Court will be asked to repudiate the original understanding of the 16th Amendment. If the three Trump-appointed justices do so, they will be ignoring a century of history and blinding themselves to the original understanding of the millions of 20th century Americans who propelled the income tax amendment into the Constitution. It is one thing to make Pollock’s mistake once. It is very different to repeat it a second time.
What is more, Moore’s assertion of judicial power may well provoke a shattering constitutional confrontation with President Joe Biden or another future president if they choose to support a wealth tax. It’s an increasingly popular proposal in the Democratic Party, led by Sen. Elizabeth Warren. Under her initiative, 99.9 percent of Americans would pay no wealth tax. Only families owning more than $50 million would pay a 2 percent annual tax on assets worth more than that amount. The rate moves up to 4 percent on assets of more than $175 million, hitting the richest 16,000 households in the country.
In estimating the yield from this tax during her 2020 presidential campaign, Warren relied on studies based on the economy’s performance in preceding decades. One of us, Bruce Ackerman, has updated the numbers in his forthcoming book, The Postmodern Predicament; it demonstrates that, even under conservative assumptions, such a proposal can yield $3 trillion a year under current economic conditions — and even more as GNP continues to grow over the coming decades. Its enactment would enable the Biden administration to reach out to the states and offer massive funding for well-organized programs providing free college education, universal child care and thoughtful elder care.
The stakes are high for the Supreme Court when it hears oral arguments in Moore. If the three Trump-appointed justices join their conservative colleagues in declaring wealth taxation unconstitutional, they will not only betray their originalist principles. They will also betray fundamental principles of American democracy — which leave it up to the voters, not the courts, to decide whether it is in the public interest for the super-rich to contribute generously to their fellow citizens’ struggle for a meaningful life in the 21st century.