Volokh conspiracy lawyer scrgruppen
in Moore v. United StatesThe Supreme Court will decide this year whether the Ninth Circuit was right to uphold constitutional taxes on unrealized capital gains and wealth taxes. Ed Meese, Gary Lawson, and I wrote Philip Williamson’s amicus curiae brief urging the Supreme Court to overrule the Ninth Circuit on both points. Our brief presents the original general meaning of the Sixteenth Amendment and the requirement to apportion direct taxes among the states. We urge the Supreme Court to ignore bad case law and uphold the original general meaning of the constitutional text.
The Sixteenth Amendment authorizes Congress to tax “incomes from whatever source” without apportioning them among the states. Unrealized capital gains are neither “income” nor “derivative” in the original sense of the amendment. Both popular and legal dictionaries from the years following the ratification of the Sixteenth Amendment underscore this point. The same applies to the context of the amendment. The almost contemporary Supreme Court decision in Eisner v. Macomber. All evidence demonstrates that the original meaning of the Sixteenth Amendment is commonsense: perception is a prerequisite to income; The money must reach taxpayers’ hands in order to become taxable “income.”
The Ninth Circuit took a different and unprecedented view. The Court of Appeal concluded that perception is no A prerequisite for income, the Morrises could therefore be taxed on unrealized gains in wealth. This rationale is not limited to the Morris family, or to the specific tax the court applied in their case. Alternatively, under the Ninth Circuit’s analysis, investors may be taxed on their unrealized capital gains in their Vanguard funds or stock portfolios. Furthermore, homeowners may be taxed on their unrealized capital gains on their homes and land. The Ninth Circuit is the only federal appeals court to hold this issue. The Supreme Court must overturn the Ninth Circuit’s ruling and restore the original, logical meaning of the Sixteenth Amendment.
The American Revolution began in 1776 as a tax revolt. The Framers of the Constitution in Philadelphia knew that a Constitution giving Congress the power to enact a general wealth tax would never be ratified. So the framers of the Constitution gave Congress general power to levy taxes not directly “taxes, duties, excises, and excises,” but they are expressly prohibited direct Taxes unless apportioned among the states according to the census.
The Framers correctly predicted that excise duties, taxes, and excises would be the preferred route for federal taxation because there is always an element of voluntariness when one buys an imported good subject to a tariff and pays sales tax on the purchase of the good. A good, pays a use tax or excise tax on a luxury good such as transportation, or pays a gift or inheritance tax by giving away property. Taxpayers can always avoid federal tax by not purchasing an imported good or item subject to sales tax, by not using a cart, or by not making a gift or bequest. The tax on unrealized capital gains is not a tax on the transaction initiated by the taxpayer. It is essentially a wealth tax, and is precisely the kind of head or per capita tax that the Constitution requires to be apportioned.
The tax on the Morris family’s unrealized wealth gains cannot be considered an excise duty, levy, or excise tax. Rather, it is a direct tax. This would require apportionment among the several states according to population, unless exempt from apportionment under the Sixteenth Amendment—which it is not.
For these reasons, the direct tax imposed on the unrealized capital gains of the Morris family is considered unconstitutional.
