A Thought on Moore v US

Moore v US is a tax case that the Supreme Court has agreed to hear in its next term, beginning 2 October. The case asks whether mere asset value increases—wealth increases—can be taxed as income, just because of that increase, but before it has been realized—before the asset actually has been disposed of for more than the cost of its acquisition, with that value increase turned into actual dollars on the barrelhead.

The proximate subject concerns a provision in the 2017 tax reform that levied a one-time mandatory repatriation tax on foreign companies.

But the tax applied to American shareholders, even passive investors like Charles and Kathleen Moore of Washington state. They were hit by a surprise $14,729 tax bill, though they had never seen a dime of income from their investment in a friend’s company in rural India. They were taxed instead on the unrealized income of the foreign company.

The Moores sued for a refund—because with this IRS, of course they had to—but

the Ninth Circuit ruled that “realization of income is not a constitutional requirement.”

The Wall Street Journal‘s editors argue that

This defies the traditional understanding in US tax law, and in Supreme Court doctrine, that income must be realized before it can be taxed.

I go the editors one further. A homeowner can’t take an increase in his home value (for instance) down to the corner grocer and buy food, or even pay off credit card debt. That last, in particular, requires floating a new loan, even if in the form of refinancing the old. Neither can the Moores take any increase in their investment value on down to their auto dealership and buy an automobile: they must first convert the increase into a loan or into hard cash: they must realize that value increase.

If an increase in value is unrealized—if it hasn’t been converted to actual spendable value—it isn’t income in the first place; it doesn’t exist in any form except as wisps in the æther.

There’s nothing in the æther that’s taxable.

Rebellion, or…?

Wagner MFWIC (perhaps ex-MFWIC) Yevgeny Prigozhin now claims his move through Rostov-on-Don, then up the M4 highway through Voronezh on the way to Moscow, was not an attempt to overthrow the Russian government, or even the Russian Defense establishment. (Note: the cite actually is a Moscow Times reprint of an AFP article.)

We went to demonstrate our protest and not to overthrow power in the country[.]

The move, which involved attacks on the Wagner units by Russian army and air force units and Wagner shootdowns of a number of helicopters and a command and control airplane, was the Russian iteration of a mostly peaceful protest.

On the other hand,

[T]he [Russian] Ministry of Defense said that the Wagner paramilitary group that launched a mutiny last week was preparing to hand over its heavy weapons[.]

It’s not necessarily an open question, then: the move to separate Wagner from its heavy weapons suggests the Russian government has made up its mind on how much protest, peaceful or otherwise, was involved in the matter.