…those assets will be gobbled up – at depressed prices – by those with easy access to money. That is, by the plutocrats and connected foundations, businesses, government directly, etc.

A tax case you’ve probably never heard of – because the MSM doesn’t cover boring stories like taxation, unless they’re promoting tax rate increases – is heading for the US Supreme Court and for once its outcome could result in a very big impact on future US government revenue, and possibly provide a lead to other nations around the world, like New Zealand.

Back in the dawn of the Trump Administration a thing called the 2017 Tax Cuts and Jobs Act was passed by a GOP House and Senate and signed into law by President Trump. Despite its name and the fact that it did implement some solid tax cuts that especially made a difference with the lowest income segment of workers, it also included some new innovations in taxation, and the focus of this case is one of those: the “Mandatory Repatriation Tax” (MRT).

This case has arisen because the IRS sent a $14,729 tax bill to a Charles and Kathleen Moore for their share of profits in a company. So far, so normal; if you own shares in a company you get taxed on the dividends and (in the USA) on the capital gains you make if you sell the shares.

The problem is that although the Moore’s did own a 13% stake in the specific company for which they are being taxed – one that supplies low-cost equipment to small farmers in India – they’ve never made any money from it, because it ploughs all its profits back into the business. The idea was to help the world with cheap, useful technology, starting with Indian farmers, not make the big bucks. As you can imagine the Moore’s were pretty pissed off so they sued the government on the grounds that the IRS had violated the Sixteenth Amendment. (passed in 1913 it enabled a permanent US Federal income tax)

They lost in federal district court and in the Ninth Circuit Court of Appeals and the reason they lost is scary, given that the history of tax in America (and the West) is that you can’t be taxed on money until you’ve realised that money; that you have it, or have had it, in your hot little hands. It’s a common-sense matter and in the US was resolved legally way back in 1920 by SCOTUS.

Until now, when the Ninth Circuit concluded that realisation is not a precondition for income. The good folk at the Volokh Conspiracy explain what that means not just for the Moores but everybody else in America:

[A]nd so the Moores could be taxed on unrealized gains in wealth. That rationale is not limited to the Moores, or to the particular tax, which the court applied in their case. Rather, under the Ninth Circuit’s analysis, investors might be taxed on their unrealized capital gains in their Vanguard funds or their stock portfolios. Moreover, homeowners might be taxed on their unrealized capital gains in their houses and land.

Ah yes. Taxing the family home because of possibly insane levels of value increase (almost always because of stupid government policies) that have now made the homeowners richer than Croesus, at least on paper because they haven’t sold it. But who cares? They’re rich and they’ll find the money from somewhere. One of the Wet Dreams of Socialists everywhere on the planet, including here. Ring any bells?

Oh sure, facing defeat in this year’s election Labour PM Chris Hipkins dumped proposals for capital gains and wealth taxes – but after the loss and following a lot of heated criticism from inside Labour, and also from the Greens, he put it back on.

And if our productivity continues to blow, leading to lower income increases over time while our welfare state demands relentlessly increase, you can bet that a future Labour-Green-Te Paiti Maori government will be all in on taxing unrealised “income” from all sources, and they would love it if they could point to the USA, of all places, as having shown the way.

After all, the Biden Administration and the Democrat Party, supposedly more “right-wing” than our National Party, are so ecstatic at the thought of vast new rivers of cash flowing into their coffers via having unfettered taxing authority that they’re already fighting hard by demanding that Justice Alito recuse himself from Moore v. United States. He’s told them to get stuffed, but when you’ve got a squish like Chief Justice Roberts it’s no certain thing that they’ll just return to the straight-forward 1920 SCOTUS decision, even with a supposed 6-3 conservative majority.

After all, it was Republicans that created the MRT in the first place. No wonder their voters often call them The Stupid Party.

Ace of Spades blogger “Joe Mannix” has an interesting take on this issue, pointing out that this will force asset sales, also forcing asset prices lower, which will reduce the unrealised tax take in fairly short order:

This is a stupid scheme that, at best, can work only on a short to intermediate timeline before asset prices are turfed and the tax basis declines. It will also have extremely nasty consequences on the financial system. This is a game with a fairly predictable end that will never raise the amounts that our Party masters envision. So why do it?

I think the answer to that is the secondary effect of such a scheme: expropriation with reduced compensation. This new tax (I assume it will sail through the courts), will enable vast concentration of assets in the hands of extremely wealthy people and corporations, and the government. As asset sales are forced so that the putative “owners” can pay the tax, those assets will be gobbled up – at depressed prices – by those with easy access to money. That is, by the plutocrats and connected foundations, businesses, government directly, etc.

If you were looking to achieve a massive concentration of assets under the control of very wealthy people and organizations that have easy access to money – almost all of whom just so happen to be good Party men – this would be a pretty good way to realize that outcome.