On Tuesday, December 4, the Supreme Court heard oral arguments in Moore v. United States. The case concerns a challenge to the “mandatory repatriation tax,” and asks whether the Constitution allows Congress to tax American shareholders for the unrealized earnings of a foreign corporation. In this episode, Akhil Amar of Yale Law School and Anastasia Boden of the Cato Institute join Jeffrey Rosen to break down the arguments on both sides of the case. The conversation touches on the history of taxation in the Founding era, the extent of Congressional power, and the very meaning of the word “taxation.”
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Today’s episode was produced by Lana Ulrich, Bill Pollock, and Samson Mostashari. It was engineered by Bill Pollock. Research was provided by Lana Ulrich, Samson Mostashari, Cooper Smith, and Yara Daraiseh.
Participants
Akhil Amar is Sterling Professor of Law and Political Science at Yale University, where he teaches constitutional law at both Yale College and Yale Law School. He is the author of more than 100 law review articles and several books, most notably The Bill of Rights (1998), America’s Constitution (2005), America’s Unwritten Constitution (2012), The Constitution Today (2016), and his latest book is The Words That Made Us: America’s Constitutional Conversation, 1760-1840 (2021). He is the host of the weekly podcast, Amarica’s Constitution. Amar filed a brief in the case in support of the United States.
Anastasia Boden is the director of the Robert A. Levy Center for Constitutional Studies at the Cato Institute. Before joining Cato, Boden was a civil rights attorney at the Pacific Legal Foundation, where she led the organization’s equality and opportunity program. She also co‐created the podcast Dissed, which tells the stories behind infamous Supreme Court dissents. Boden filed a brief in the case in support of Moore.
Jeffrey Rosen is the president and CEO of the National Constitution Center, a nonpartisan nonprofit organization devoted to educating the public about the U.S. Constitution. Rosen is also a professor of law at The George Washington University Law School and a contributing editor of The Atlantic.
Additional Resources:
- Anastasia Boden, Amicus Brief for Petitioners, Moore v. United States
- Akhil Amar and Vikram Amar, Amicus Brief for Respondents, Moore v. United States
- Moore v. United States (oral argument via C-SPAN)
Excerpt from Interview: Akhil Amar clarifies the history of taxation from the lenses of Hamilton and Hylton.
Akhil Amar: Not just Hamilton's original understanding. So, my friend said some things that are not true, okay? And I'm gonna use every ounce of my authority as Sterling Professor of Constitutional Law and as an historian whose written many books and as the co-founder of the National Constitution Center, we've got to get our history right and our law right.
So, let me take a step back. You can have all sorts of theories, but you can't actually just assert facts that aren't so. So, here's Hamilton's position. He says at Philadelphia in the very building just right across the mall from the National Constitution Center, it actually has a plan, and when you look at that plan he says land taxes and head taxes are the only things that will require apportionment.
That's very clear. And that's exactly what he says in the Federalist Number 36. He wrote seven Federalist Papers, he says, "Only land taxes and only head taxes." Nothing about use or anything like that. And that's basically what he says in his oral argument in the Hylton case.
There's a little bit of wrinkle that I won't go into, and that is what actually the justices say. They don't say anything about use. That's not true. The justices say that only land taxes and head taxes are subject to this apportionment rule as a general proposition. And they say why, because they buy Hamilton's argument, that we shouldn't have a broad definition of direct tax, because direct taxes actually are very difficult to administer.
And the whole point of his new regime is actually to make it much easier to tax. Nor is it true that Americans were actually heavily taxed in the revolutionary era. They were not, in fact. I assert, as a historian whose written many books on this topic, the tax was illegitimate, but not high.
The tax system under the British, because actually it wasn't based on representation. And the new model is you can be taxed up and down and sideways very heavily, as long as it comes from congress. And if you don't like that, you have to vote against congress. And we didn't have that under the Brits, because you can't vote against Parliaments.
You don't have a vote for Parliament. You can't vote against the King because you didn't have a vote for or against the King. The American Revolution, to repeat, is not heavy taxation, is an exclamation point. It is not no taxation! It is no taxation without representation, and that's in the Declaration of Independence that was also drafted in Independence Hall right across from the National Constitution Center.
So, we have to get our historical facts right. You can argue about whether Hylton is correct or not. You can argue about whether Hamilton was correct or not. But I promise you, Hamilton and Hylton make this a very, very easy case if it were only about that than other later cases that we're gonna have to talk about.
You asked about Pollock, but Hamilton says direct taxes are land taxes and head taxes and nothing else. And if we wanna go into the details, it's all about slavery and the three fifths clause. And actually one justice says that openly, Justice Patterson, another sign of the constitution, Abraham Baldwin says that very openly in the first Congress.
So but it's not actually about use versus this, versus that. It's just head taxes and land taxes are direct taxes, and nothing else. That's Hamilton's position in Philadelphia, that's Hamilton's position in the Federalist Papers. That's Hamilton's position in his oral argument. That's the position of the justices of the Supreme Court in the Hylton case.
Now, stuff happens afterwards, but we have to get it straight, if this is actually gonna be decided on the basis of Hamilton and Hylton, oh my God, this is easy. You can tax carriages, and it wasn't a tax on the use of a carriage. You were taxed just by having a carriage, whether you used it or not.
If you used it once, if you used it zero times, if you used it a gazillion times, you were just taxed because you own a carriage. And now, there's new cases about basically you're taxed because you own certain wealth. And in fact, Hamilton says it's a fair tax 'cause it's a luxury tax…
Excerpt from Interview: Anastasia Boden discusses her main argument of her amicus brief for petitioners.
Anastasia Boden: Yes. Well, certainly there are Supreme Court cases explicitly interpreting the 16th Amendment as requiring realization. Now General Prelogar said that those cases can be distinguished for various reasons or that they've been undermined since then. And then she also pointed to many of the other taxes that Professor Amar referred to, which don't seem at first blush at least require realization. But the attorney for the Moore's had many responses to that. So, if we look at things like partnerships, that's one thing where the partners can be taxed, even if they don't realize, so to speak, any of the income of the partnership. But as the attorney for the Moore's, Andrew Grossman, said you know, that's a very closely held organization. It's very different than something like a corporation where you only hold more than 10%.
In a partnership you're usually gonna have some control, or at least constructive control over what that income, what use it's put towards. And so it's reasonable for Congress to consider that, at least constructive realization, but still, there should be a realization requirement, some form of it. Whereas the Moore's have had no realization at all. It's just unfair to call it constructive realization on their end.
The same thing goes for things like futures contracts, which again Professor Amar referred to. Those are settled each day, which creates sort of a constructive realization that you're opting into it each day, there's at least some form of consent there. It's very easy actually to say that all of the supposed taxes that don't require realization do in some form require at least constructive realization. And while it's true that the 16th Amendment does not say realization, there were some great briefs, including a brief of corpus linguistic professors in support of neither party, who thought that both parties kind of had the methodology wrong, but at least agreed at the end of the day that the word income itself was always used to have an inherent realization requirement and I think the case law overall supports it.
That's a common thread through the case law leading up until now. It seems commonsensical to me that income would require realization. But in any event, I respect the argument that there was realization here. The corporation realized some income, and that came up a lot at oral argument, but the point is there was no realization as to the person who's actually paying the taxes.
There's no realization as to the Moore's. And so I think it's a problem to just point to realization by a third party, and some of the justices seem to indicate, well, maybe that's a due process problem. Maybe you should have brought a due process claim. And maybe that's true, although I'm very skeptical of due process, because I litigated due process cases and I know what it means to the rational basis test, you're almost never gonna win under the government. But I think it also makes sense to consider the 16th Amendment problem, because the tax itself is not qualifying as an income tax. So, that would be the argument, I think, on the flip side of Professor Amar's.
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