Supreme Court could preempt wealth taxes before they’re even enacted

The Supreme Court is hearing a case Tuesday that could upend current tax law and make future tax hikes on rich people unconstitutional, while also potentially costing the treasury hundreds of billions of dollars in the next decade. The cherry on top is that Justice Samuel Alito will be hearing—and involved in deciding—this case despite a clear conflict of interest in it. So much for that ethics code!

The case, Moore v. United States, is a direct challenge to the federal government’s power to tax, and could result in a potentially far-reaching challenge to the nation’s tax code. It challenges a  one-time tax imposed by the 2017 Trump tax scam on corporate earnings that had accumulated overseas. It was brought by a Washington state couple seeking a $14,729 refund for taxes paid on their investments in a company based in India, a provision included in the law to offset some of the huge tax cuts it gave to wealthy individuals and corporations. Under this provision, some investors “must pay a percentage of the money that the corporation has kept overseas, even though the investor has not sold their stock or received any of that money as a dividend.”

The onetime tax, which investors can pay out over eight years, is expected to raise $340 billion by 2027. That’s the first budget-busting potential problem if the Supreme Court finds the law unconstitutional. Another problem is that a broad ruling could open up tax law on partnerships, multinational companies, and bond investors for litigation. Even former House Speaker Paul Ryan, the guy who helped pass the 2017 GOP tax scam, has warned that as much as a third of the tax code could be upended if the court rules broadly for the plaintiffs.

“It’s hard to see how this is going to turn out well,” David Rosenbloom, a tax lawyer at Caplin & Drysdale, told The Wall Street Journal. “They really are opening up a can of worms.” How the anti-tax activists who brought the case hope it turns out is for the court to declare any future wealth taxes, like Sen. Elizabeth Warren’s proposed 2% tax on multimillionaires and billionaires, unconstitutional.

One of those activists is arguing the case, and that’s where Alito’s conflict of interest arises. Earlier this year, Senate Judiciary Committee Chairman Dick Durbin raised the conflict with Chief Justice John Roberts on the grounds that Alito granted “interviews conducted in part by an attorney with a case currently pending before the Court,” which “violated a key tenet of the Statement on Ethics Principles and Practices” that Roberts himself has said all “current Members of the Supreme Court subscribe” to. That case is this one, and the attorney who interviewed Alito and is arguing Moore is David Rivkin.

Rivkin conducted two highly politicized interviews with Alito for The Wall Street Journal this year. The first was in April, while the court was considering his petition to hear Moore, and the second was in July, after the court had accepted the case. “Mr. Rivkin’s access to Justice Alito and efforts to help Justice Alito air his personal grievances could cast doubt on Justice Alito’s ability to fairly discharge his duties in a case in which Mr. Rivkin represents one of the parties,” Durbin wrote.

In a terse statement issued by the court, Alito refused to acknowledge this, stating simply that there was “no valid reason for my recusal.” Glaring conflicts of interest aren’t valid, per Alito. The scrutiny the justice has invited on the court, as well as the far-reaching and disastrous potential consequences of a broad ruling, may curb at least a few of the conservative justices in their ruling.

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