Amicus Curiae Brief — Charles G. Moore, et ux., Petitioners v. United States

No. 22-800

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In The

Supreme Court of the United States

---------------------------------♦--------------------------------CHARLES G. MOORE and KATHLEEN F. MOORE,

Petitioners,

v.

UNITED STATES OF AMERICA,

Respondent.

---------------------------------♦--------------------------------On Petition For Writ Of Certiorari

To The United States Court Of Appeals

For The Ninth Circuit

---------------------------------♦--------------------------------BRIEF OF AMICUS CURIAE

LANDMARK LEGAL FOUNDATION

IN SUPPORT OF PETITIONERS

---------------------------------♦--------------------------------RICHARD P. HUTCHISON

LANDMARK LEGAL

FOUNDATION

3100 Broadway, Suite 1210

Kansas City, MO 64111

816-931-5559

MATTHEW C. FORYS

Counsel of Record

MICHAEL J. O’NEILL

LANDMARK LEGAL

FOUNDATION

19415 Deerfield Ave.,

Suite 312

Leesburg, VA 20176

703-544-6100

matt@landmarklegal.org

Attorneys for Amicus Curiae

================================================================================================================

COCKLE LEGAL BRIEFS (800) 225-6964

WWW.COCKLELEGALBRIEFS.COM

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TABLE OF CONTENTS

Page

STATEMENT OF INTEREST OF AMICUS CURIAE .................................................................

1

INTRODUCTION AND SUMMARY OF ARGUMENT ...............................................................

2

ARGUMENT ........................................................

3

I. Income must be realized before it can be

taxed...........................................................

3

II. The Apportionment Clause and Direct Tax

Clause require tax schemes like the MRT to

be apportioned by population...................... 11

III.

The potential consequences of wealth taxes

require this Court’s clarification of income,

the Apportionment Clause, and the Direct

Tax Clause .................................................. 13

CONCLUSION..................................................... 17

ii

TABLE OF AUTHORITIES

Page

CASES

Comm’r v. Glenshaw Glass Co., 348 U.S. 426

(1955) ..................................................................... 3, 5

Corliss v. Bowers, 281 U.S. 376 (1930) .........................9

Eder v. Comm’r, 47 B.T.A. 235 (1942), remanded

by 138 F.2d 27 (2d Cir. 1943) ................................ 7, 8

Eisner v. Macomber, 252 U.S. 189 (1920) ... 3-5, 9, 11, 12, 14

Garlock, Inc. v. Comm’r, 58 T.C. 423 (1972), aff ’d

by 489 F.2d 197 (2d Cir. 1973) ........................ 8, 9, 10

Heiner v. Mellon, 304 U.S. 271 (1938) ...................... 6, 7

Helvering v. Bruun, 309 U.S. 461 (1940) ................ 5, 10

Marbury v. Madison, 5 U.S. (1 Cranch) 137 (1803) ........4

Nat’l Fed’n of Indep. Bus. v. Sebelius, 567 U.S.

519 (2012) ..................................................................1

Pollock v. Farmers’ Loan & Trust Co. (Pollock I),

157 U.S. 429 (1895) .................................................11

Pollock v. Farmers’ Loan & Trust Co. (Pollock II),

158 U.S. 601 (1895) ........................................... 11, 14

Whitlock’s Est. v. Comm’r, 59 T.C. 490 (1972),

aff ’d in part, rev’d in part, 494 F.2d 1297 (10th

Cir. 1974) ............................................................... 8, 9

CONSTITUTION

U.S. Const., amend. XVI ................................ 2-4, 11-13

U.S. Const., art. I, § 2, cl. 3............................................2

U.S. Const., art. I, § 9, cl. 4............................................2

iii

TABLE OF AUTHORITIES – Continued

Page

STATUTES AND REGULATIONS

Tax Cuts and Jobs Act of 2017, Public Law 11597 (Dec. 22, 2017) .................................... 2, 3, 8, 9, 11

OTHER AUTHORITIES

The Federalist No. 10 (J. Madison) (Clinton Rossiter ed., 1961) .........................................................16

2 The Records of the Federal Convention of 1787

(Max Farrand ed., 1911) .........................................12

Bruce Ackerman, Taxation and the Constitution,

99 Colum. L. Rev. 1 (1999) ................................ 11, 14

Ilan Benshalom & Kendra Stead, Realization

and Progressivity, 3 Colum. J. Tax L. 43

(2012) ................................................................. 15, 16

Erik M. Jensen, Did The Sixteenth Amendment

Ever Matter? Does It Matter Today?, 108 Nw.

U.L. Rev. 799 (Spring, 2014)....................................13

Erik M. Jensen, Interpreting the Sixteenth Amendment (By Way of the Direct-Tax Clauses), 21

Const. Commentary 355 (Summer, 2004) ..............12

Dawn Johnsen & Walter Dellinger, The Constitutionality of a National Wealth Tax, 93 Ind.

L.J. 111 (Winter, 2018) ............................................14

Calvin H. Johnson, Fixing the Constitutional

Absurdity of the Apportionment of Direct Tax,

21 Const. Commentary 295 (Summer, 2004) .........10

iv

TABLE OF AUTHORITIES – Continued

Page

Calvin H. Johnson, A Wealth Tax Is Constitutional, Vol. 38, No. 4 ABA Tax Times (August

8, 2019) ....................................................................15

Office of Mgmt. & Budget, Exec. Office of the

President, OMB, Budget of the U.S. Government, Fiscal Year 2024 (2023) .................................14

Rodney P. Mock & Jeffrey Tolin, Realization And

Its Evil Twin Deemed Realization, 31 Va. Tax

Rev. 573 (Spring, 2012) ......................................... 6, 9

Henry Ordower, Revisiting Realization: Accretion Taxation, the Constitution, Macomber and

Mark to Market, 13 Va. Tax Rev. 1 (1993) ........... 6, 10

Deborah H. Schenk, A Positive Account of the

Realization Rule, 57 Tax L. Rev. 355 (Spring,

2004) ........................................................................15

Deborah H. Schenk, Saving the Income Tax

With a Wealth Tax, 53 Tax L. Rev. 423 (Spring,

2000) ........................................................................15

1

STATEMENT OF INTEREST

OF AMICUS CURIAE1

Amicus Curiae Landmark Legal Foundation

(“Landmark”) is a national public-interest law firm

committed to preserving the principles of limited government, separation of powers, federalism, originalist

construction of the Constitution and individual rights.

Landmark has a unique perspective on this case. It

was one of the very few amici curiae who raised the

implications of the Apportionment Clause and Direct

Tax Clause in the main challenge to the Affordable

Care Act. Brief for Amicus Curiae Landmark Legal

Foundation at 18-35, Nat’l Fed’n of Indep. Bus. v. Sebelius, 567 U.S. 519 (2012) (No. 11-393). This area had

been largely ignored in the Government’s briefs. Id. at

669 (Scalia, Thomas, Kennedy & Alito, JJ., dissenting).

Landmark urges this Court to grant the petition

for certiorari and reverse the ruling of the Court of

Appeals for the Ninth Circuit.

---------------------------------♦---------------------------------

1

No counsel for a party authored this brief in whole or in

part, and no counsel or party made a monetary contribution intended to fund the preparation or submission of this brief. No person other than Amicus Curiae, its members, or its counsel made

a monetary contribution to its preparation or submission. Counsel

for Amicus Curiae notified counsel for all parties of its intention

to file this brief on March 10, 2023.

2

INTRODUCTION AND

SUMMARY OF ARGUMENT

This case concerns whether Congress can redefine the text of the Sixteenth Amendment so that the

Apportionment Clause and Direct Tax Clause are effectively removed from the Constitution. U.S. Const.

amend. XVI; U.S. Const. art. I, § 2, cl. 3; U.S. Const. art.

I, § 9, cl. 4. The Mandatory Repatriation Tax (MRT) of

the Tax Cuts and Jobs Act of 2017, Public Law 115-97

(Dec. 22, 2017) (TCJA), treated the undistributed earnings of a controlled foreign corporation (CFC) as income taxable to a minority shareholder. The MRT was

not a tax of the Petitioners’ income. Instead, the MRT

acted as a direct tax on the Petitioners’ property. The

MRT violated the Constitution because this direct

tax on shares of stock was not apportioned by population.

The Ninth Circuit’s opinion below ignored the realization requirement in this Court’s precedents and

interpreted the taxing power too broadly. Although the

Sixteenth Amendment narrowed the scope of the Apportionment Clause and Direct Tax Clause, they are

constitutional restrictions that remain in force and

cannot be ignored out of administrative convenience.

This Court should grant the petition because of

the need for stability and clarity in the nation’s federal

tax system. There is a growing movement in Congress

to pass direct taxes on wealth. But wealth-tax schemes

broader than the MRT could trigger liquidity issues

with serious consequences for the national economy.

3

The Court should make the boundaries of income tax

realization clear and demonstrate that the Apportionment Clause and Direct Tax Clause survive as restrictions on taxation before Congress passes wealth

taxes.

---------------------------------♦---------------------------------

ARGUMENT

I.

Income must be realized before it can be

taxed.

This Court must grant the petition to correct a distorted vision of Congress’s taxing power. In the Ninth

Circuit’s view, there are almost no principled limits to

what Congress can define as taxable income. In the

opinion below, the court justifies its holding by informing us that the concept of income itself is flexible. Pet.

App. 11. Taxes like the MRT that deem realization of

corporate income to shareholders have been upheld in

circuit courts, we are reminded. Pet. App. 11-12. They

further state, “Whether the taxpayer has realized income does not determine whether a tax is constitutional”; taxable gain itself is broadly construed; and

there has been no constitutional ban on the disregard of the corporate form to allow taxing shareholder income. Pet. App. 12-13. The court below even

waved away this Court’s longstanding precedents,

Eisner v. Macomber, 252 U.S. 189 (1920), and Comm’r

v. Glenshaw Glass Co., 348 U.S. 426 (1955), establishing that the Sixteenth Amendment inherently requires

4

an event when income is realized before it can be

taxed. Pet. App. 14-16.

Taken to its logical end, the Ninth Circuit would

free Congress from nearly all constitutional restraints

on the taxing power. Although some deference to

Congress’s power may be due, the court below goes

too far. In their view, Congress can disregard the plain

meaning of the text of the Sixteenth Amendment, define income as they see fit without interference from

the Amendment or the Supreme Court, and thereby

avoid the restrictions on the taxing power in the Apportionment Clause and Direct Tax Clause. This

cannot possibly occur without raising separation-ofpowers concerns under Marbury v. Madison, 5 U.S. (1

Cranch) 137 (1803). As the Macomber Court reasoned,

“Congress cannot by any definition it may adopt conclude the matter, since it cannot by legislation alter the

Constitution, from which alone it derives its power to

legislate, and within whose limitations alone that

power can be lawfully exercised.” Macomber, 252 U.S.

at 206. Fortunately, the Ninth Circuit’s opinion does

not withstand scrutiny of the cases it cites in support

of its vision.

The Sixteenth Amendment grants Congress the

power “to lay and collect taxes on incomes, from whatever source derived, without apportionment among the

several States, and without regard to any census or

enumeration.” U.S. Const., amend. XVI. From the beginning, this Court interpreted the Amendment to

mean that a realization of gain is inherent to the taxation of income. In Macomber, the Court considered

5

whether a shareholder’s receipt of a corporate stock

dividend constituted a taxable gain under or changed

“only the form, not the essence,” of his investment.

Macomber, 252 U.S. at 210. Ultimately, the shareholder “received nothing out of the company’s assets

for his separate use and benefit.” Id. at 211. The Court

defined income as “the gain derived from capital, from

labor, or from both combined.” Id. at 207.

Macomber’s early attempt at a definition involving

capital and labor was not sufficiently broad to encompass all the conceivable forms of taxable income. The

Ninth Circuit misguidedly focuses on this point as a

sign that Macomber is questionable authority, but that

misses the point entirely. Despite Macomber’s weakness in describing forms of income, its core principle

that realization is a requirement for the taxation of

income holds. Bruun, cited by the court below to suggest the concept of taxable gain is malleable, also involved a realization event. The taxpayer “realized

taxable gain from the forfeiture of a leasehold, the tenant having erected a new building upon the premises.”

Helvering v. Bruun, 309 U.S. 461, 464 (1940). And in

Comm’r v. Glenshaw Glass Co., 348 U.S. 426 (1955), the

Court devised a three-part description of income that

is still commonly used: “instances of undeniable accessions to wealth, clearly realized, and over which the

taxpayers have complete dominion.” Id. at 431.

Realization involves a change in the taxpayer’s

rights to his property. “[A]s the Court has decided each

case, it has held to the principles that realization is

essential to the imposition of tax and that alteration of

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the taxpayer’s aggregate rights with respect to the

property is a condition of realization.” Henry Ordower,

Revisiting Realization: Accretion Taxation, the Constitution, Macomber, and Mark to Market, 13 Va. Tax Rev.

1, 29 (1993). Furthermore, “while the cases [refining

Macomber] may have all wrangled with the outer limits of realization, they nevertheless required an identifiable and actual event to occur.” Rodney P. Mock &

Jeffrey Tolin, Realization and its Evil Twin Deemed

Realization, 31 Va. Tax Rev. 573, 598 (2012). In the instant case, the Government never disputed that the

Petitioners realized nothing from their KisanKraft investment. Pet. Br. 7. But in most of the cases cited by

the Ninth Circuit, the taxpayers did realize their income, or otherwise enjoy “an alteration of [their] relationship to the property” being taxed. Ordower at 44.

The court below counters the realization requirement by arguing that whether a taxpayer has “realized

income does not determine whether a tax is constitutional.” Pet. App. 12 (citing Heiner v. Mellon, 304 U.S.

271, 281 (1938)). Mellon does not provide much support

for this argument. Mellon shows, they argue, that

whether a partner’s proportionate share of the partnership’s net income was distributable to the taxpayer

“was not material to whether it could be taxed.” Pet.

App. 12. That is technically true, but an oversimplification of the issues involved.

Mellon involved a partnership, a pass-through entity for tax purposes, not a corporation like KisanKraft.

The partnership, which had been involved in the sale

of alcohol, dissolved after the death of one of the three

7

partners. The surviving partners argued that they became liquidating trustees by operation of state law, so

prior income earned from operations of the dissolved

partnerships was income to the survivors only in their

fiduciary positions as trustees. Mellon, 304 U.S. at

273. The Court rejected that argument because the

state law could not control the federal law’s determination that the income went to the partnership and

not the trust. Id. at 279. And the income tax required

by federal law on partnership income was due whether

the partners received their distributions or not. Id. at

279-81. How the assets were disposed of and how proceeds were applied might be a matter of state law, but

however done, federal law required that taxes be paid

in years when profits were made. Id. at 280. This is

simple logic.

Mellon is easily distinguished from the instant

case. The past profitable sales of alcohol were realization events of income to the partnership and thus to

the individual partners, whether they received the income or not. Here, Petitioners are minority corporate

shareholders, not partners, and “it’s undisputed that

the[y] . . . lacked the authority to compel a dividend

payment constituting realized income.” Pet. App. 41. To

suggest that Mellon allows the government to treat

corporate income as constructively received and taxable to a shareholder the same way distributable partnership income is taxable to a partner is not defensible.

The court below also misapplies Eder v. Comm’r

of Internal Revenue, 138 F.2d 27 (2d Cir. 1943), which

it cites both for the idea that realization is not

8

constitutionally required and as an example, along

with Garlock, Inc. v. Comm’r, 489 F.2d 197 (2d Cir.

1973) and Whitlock’s Est. v. Comm’r, 59 T.C. 490 (1972),

aff ’d in part, rev’d in part, 494 F.2d 1297 (10th Cir.

1974), of taxes like the MRT that have been upheld. In

Eder, a taxpayer who owned shares in a foreign corporation was at first prohibited under Colombian exchange control laws and regulations from repatriating

any of his firm’s earnings to the United States, and

then only in amounts not exceeding $1,000 per month.

Eder v. Comm’r, 47 B.T.A. 235, 237 (1942). The taxpayer argued that his domestic taxable income should

be reduced to reflect his inability to access those foreign funds. The Second Circuit ruled, however, that the

“inability to expend income in the United States . . . by

operation of law, or by agreement among private parties, is no bar to its taxability.” Eder v. Commissioner

of Internal Revenue, 138 F.2d 27, 28 (2d Cir. 1943). This

situation is fundamentally different from this case,

where the Petitioners have no ability to realize gain

from their ownership interests anywhere in the world

because KisanKraft never made a single distribution

and they had no power to compel it to do so.

As to the contention that laws similar to the MRT

have been upheld in Eder, Garlock and Whitlock’s Est.,

these cases were addressed by the circuit courts, not

this Court. And none of these cases actually claimed to

discard the realization requirement. The taxes in question were tailored to circumstances where Congress

determined that the taxpayers had achieved the “constructive receipt of income.” Garlock v. Comm’r, 58 T.C.

423, 438 (1972). Laws capturing foreign income arose

9

out of special circumstances. “Congress is only willing

to ignore realization when: (1) taxpayers are exiting

the taxing system completely, such as in the case of expatriates, or (2) when taxpayers are deferring unrealized gains beyond their natural life cycle by utilizing

various tax avoidance strategies, such as certain offshore transactions.” Mock & Tolin at 637.

The constructive receipt of income in systems like

Subpart F or the MRT can only be justified if the shareholder has some measure of control over the distribution of dividends, but chooses not to distribute, simply

to avoid taxes. This concept of control was mentioned

at the Tax Court level in both Garlock and Whitlock’s

Est. “In our opinion, the actual control of [Garlock] S.A.

at all times rested in the petitioner as owner of the

common stock. That was the intention, and it was effectively carried out.” Garlock, Inc. v. Comm’r, 58 T.C.

423, 438 (1972). In Whitlock’s Est., the Tax Court

stated that Macomber could not be read “as denying to

Congress the power to attribute a corporation’s undistributed current income to the corporation’s controlling

stockholders.” Estate of Whitlock, 59 T.C. at 508 (1972).

It continued, “it is safe to say that the [Macomber]

Court simply did not direct itself to the situation of the

tightly controlled corporation where controlling stockholders are able to manipulate the corporation’s profits

and capital almost at will.” Id. This principle is best

summarized by Justice Oliver Wendell Holmes: “The

income that is subject to a man’s unfettered command

and that he is free to enjoy at his own option may be

taxed to him as his income, whether he sees fit to enjoy

it or not.” Corliss v. Bowers, 281 U.S. 376, 378 (1930).

10

Petitioners owned 11% of a CFC. Pet. App. 5. To

the extent that the MRT captures income from shareholders with less than a controlling share of a corporation with no power to compel distributions, it is

overinclusive. Professor Henry Ordower observed that

“Historical departures from fundamental tax principles sometimes find their justification in a need to defend the integrity of the taxing system from avoidance

and abuse.” Ordower at 86. In Garlock, the Second Circuit ruled against a taxpayer who had taken intentional steps to avoid being classified as a CFC subject

to Subpart F taxation. In that case, the court noted the

significance of bringing in preferred shareholders who

“understood both [the taxpayer’s] motives and its situation” and “would have no interest in disturbing the

taxpayer’s continued control.” Garlock, Inc., 489 F.2d at

201. There is nothing in the record to indicate the Petitioners have engaged in such abuse to justify treating

KisanKraft’s earnings as their own.

Finally, Bruun provides a hint as to why much of

academia has doggedly tried to downplay tax realization cases. The Bruun Court noted that “economic gain

is not always taxable as income.” Bruun, 309 U.S. at

469. Economic gain in the abstract, like the increase of

the value of a stock portfolio or home, is broad and

cannot be captured by a realization requirement. For

supporters of a greater taxing power, realization is a

frustrating impediment. For example, in Professor

Calvin H. Johnson’s view, “ ‘Income’ is . . . a malleable

concept that the Court can use to avoid apportionment.” Calvin H. Johnson, Fixing the Constitutional

Absurdity of the Apportionment of Direct Tax, 21 Const.

Commentary 295, 351 (Summer, 2004). Furthermore,

11

he wrote, “not only can the courts avoid apportionment

by manipulative expansion of such terms as ‘excise’

and ‘income,’ but they have a duty to do so.” Id. See also

Bruce Ackerman, Taxation and the Constitution, 99

Colum. L. Rev. 1 (1999).

In short, the attempts to make income a malleable

concept and to bypass the realization requirement are

related to the effort to enact direct taxes on wealth

without apportionment.

II.

The Apportionment Clause and Direct Tax

Clause require tax schemes like the MRT to

be apportioned by population.

The Sixteenth Amendment was ratified in response to two cases from 1895. In the first, Pollock v.

Farmers’ Loan & Trust Co. (Pollock I), 157 U.S. 429

(1895), the Court found that the taxation of income

from real estate is unconstitutional. After rehearing,

the Court expanded their reasoning to income from

personal property and held that the entire income

tax statute at issue was unconstitutional. Pollock v.

Farmers’ Loan & Trust Co. (Pollock II), 158 U.S. 601

(1895). The Ninth Circuit noted that the Sixteenth

Amendment overruled the second Pollock’s holding

that income from personal property was subject to the

Apportionment Clause. This “reinforc[ed] the narrow

reach of the Apportionment Clause” in their view. Pet.

App. at 10.

The Macomber Court cautioned about attempts to

deny the reach of the Apportionment Clause and Direct Tax Clause altogether. “A proper regard for its

12

genesis, as well as its very clear language, requires

also that this Amendment shall not be extended by

loose construction, so as to repeal or modify, except as

applied to income, those provisions of the Constitution

that require an apportionment according to population

for direct taxes upon property, real and personal.”

Macomber, 252 U.S. at 206. It continued, “This limitation still has an appropriate and important function,

and is not to be overridden by Congress or disregarded

by the courts.” Id. Macomber confirms that taxes on

personal property should still be considered direct

taxes. Id. at 217-19.

The Apportionment Clause and the Direct Clause

were part of an important compromise at the Constitutional Convention. In his notes on the Convention,

James Madison described Gouverneur Morris’s proposal to tie direct taxation to representation as having

had the “object [of ] lessening the eagerness on one

side, & the opposition on the other, to the share of

Representation claimed by the S. <Sothern> [sic]

States on account of the Negroes.” Madison (July 24,

1787), reprinted in 2 The Records of the Federal Convention of 1787 at 106 & n.* (Max Farrand ed., 1911).

Madison later wrote that the direct tax and apportionment system was “one of the safeguards of the Constitution.” 4 Annals of Cong. 730 (1794). Professor Erik

M. Jensen has provided a strong defense of the clauses’

continued vitality in several articles. First, and most

obviously, “the Direct-Tax Clauses are in the Constitution, twice, and they can’t be dispensed with just

because they’re inconvenient.” Erik M. Jensen, Interpreting The Sixteenth Amendment (By Way Of The

13

Direct-Tax Clauses), 21 Const. Commentary 355, 368

(Summer, 2004). To those who claim that the clauses

are difficult to implement, he responds that it is understandable because they intended direct taxes to be

used sparingly, during emergencies. Erik M. Jensen,

Did The Sixteenth Amendment Ever Matter? Does It

Matter Today?, 108 Nw. U.L. Rev. 799, 804 (Spring, 2014).

Ordinarily, the founders intended that the federal government would be financed by indirect taxes such as

tariffs and excises. Id. Furthermore, “Apportionment

was intended to make direct taxation difficult, particularly when the tax was aimed at a sectionally concentrated base, and it largely did so.” Id. In response to

the claim that the clauses are stained by slavery, he

wrote, “While apportionment was not anti-slavery, neither was it pro-slavery as applied to both direct taxation and representation.” Id. at 809 n.61. And Professor

Jensen specifically addressed the attempts to read the

clauses out of the Constitution by redefining direct

taxes. “[T]he case for applying a substance-over-form

principle is stronger when the result is to constrain,

rather than to expand, congressional power.” Id. at

820.

III. The potential consequences of wealth taxes

require this Court’s clarification of income,

the Apportionment Clause, and the Direct

Tax Clause.

Should the Ninth Circuit’s decision remain in effect, Congress may be emboldened to pass direct taxes

on wealth.

14

Members in both the Senate and the House of Representatives have already proposed such legislation.

See Pet. Br. 25. The Executive Branch has also pushed

for taxes on unrealized gains. President Biden’s most recent budget proposal, published shortly after the Petitioners filed their brief, includes provisions “requiring

the wealthiest Americans to pay at least 25% on all

their income, including appreciated assets.” Office of

Mgmt. & Budget, Exec. Office of the President, OMB,

Budget of the U.S. Government, Fiscal Year 2024 2

(2023).

These policy proposals have found support in

parts of the legal academy. Professor Bruce Ackerman

contended that the Court could establish “a rock solid

foundation for a comprehensive tax on wealth” by

simply overturning Pollock II and Macomber to abolish

the direct tax clause. Bruce Ackerman, Taxation and

the Constitution, 99 Colum. L. Rev. 1, 58 (1999). Other

academics, while “not persuaded to go so far” in abolishing the direct tax clause merely on account of its

legacy in slavery, would “agree with Ackerman’s more

limited conclusions in support of the constitutionality

of a wealth tax.” Dawn Johnsen & Walter Dellinger,

The Constitutionality of a National Wealth Tax, 93 Ind.

L.J. 111, 119 n.37 (Winter, 2018). These same scholars

were still persuaded to denounce the “unwarranted

chilling effect of constitutional concerns about Congress’s authority to enact a wealth tax.” Id. at 113. And

some observers, in the vein of the Ninth Circuit, have

even gone so far as to question the need to abolish the

realization requirement in the first place, asserting

15

that “scholars widely agree that realization is not constitutionally mandated.” Ilan Benshalom & Kendra

Stead, Realization and Progressivity, 3 Colum. J. Tax

L. 43, 49 (2012). See also Calvin H. Johnson, A Wealth

Tax Is Constitutional, Vol. 38, No. 4 ABA Tax Times

(August 8, 2019), available at https://www.americanbar.

org/groups/taxation/publications/abataxtimes_home/19

aug/19aug-pp-johnson-a-wealth-tax-is-constitutional/.

These academic theories show the need for clarity in

this area, which this Court can provide with the grant

of cert.

Beyond the immediate constitutional issues of taxing unrealized gains, the enactment of these plans

would present problems in valuation and taxpayer liquidity. Even the most committed advocates of the

wealth tax recognize that such a “regime may force

cash-poor taxpayers to sell assets to pay their tax liabilities on unrealized profits.” Benshalom & Stead at

53. Professor Deborah H. Schenk, the long-time editorin-chief of the Tax Law Review, has downplayed these

liquidity concerns in her scholarship on the wealth

tax. See Deborah H. Schenk, Saving the Income Tax

With a Wealth Tax, 53 Tax L. Rev. 423, 454-56 (Spring,

2000). Nevertheless, she has admitted that, if the realization requirement is abandoned, there are “legitimate liquidity concerns” for “a taxpayer whose only

asset is his home, a family farm, a single heirloom, or

a cash-starved small business, and who has no source

of funds other than disposition of the asset.” Deborah

H. Schenk, A Positive Account of the Realization Rule,

57 Tax L. Rev. 355, 363-64 (Spring, 2004).

16

To prevent a crisis for illiquid asset holders, some

commentators argue that legislatures could exempt

“certain assets (e.g., residential homes, closely held corporations)” from a prospective wealth tax. Benshalom

& Stead at 53. Crafting such exceptions, however, could

immediately inflame the regional tensions which inspired the Framers to adopt an Apportionment Clause.

Barring the Apportionment requirement, Congress

could levy direct taxes on unexempted assets at great

expense to certain economic minorities. As for furnishing exemptions to certain asset-holders, it is not hard

to imagine how motivated members of Congress may

act based on the “immediate interest which one party

may find in disregarding the rights of another, or the

good of the whole.” The Federalist No. 10 at 80 (J. Madison) (Clinton Rossiter ed., 1961).

The Apportionment Clause and the Direct Tax

Clause act in conjunction as an essential safeguard of

the Constitution. The Court should affirm this principle by granting the petition for certiorari.

---------------------------------♦---------------------------------

17

CONCLUSION

The petition for certiorari should be granted.

Respectfully submitted,

RICHARD P. HUTCHISON

LANDMARK LEGAL

FOUNDATION

3100 Broadway, Suite 1210

Kansas City, MO 64111

816-931-5559

MATTHEW C. FORYS

Counsel of Record

MICHAEL J. O’NEILL

LANDMARK LEGAL

FOUNDATION

19415 Deerfield Ave.,

Suite 312

Leesburg, VA 20176

703-544-6100

matt@landmarklegal.org

Attorneys for Amicus Curiae