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A few things to note about this case.
First, this couple has spent far more money fighting this case in court than it owes in taxes. They are suspiciously well funded.
There is roughly $2.6 trillion dollars in untaxed earnings being held overseas in order to avoid taxation.
US businesses pay taxes on income, but foreign investments used to only be taxed when an asset was sold. This is a massive loophole for international businesses that allowed them to stash earnings indefinitely by moving money from one bank account to another, and only repayriating the money when it would minimize tax liability.
Closing this loophole without a one-time levy would have rewarded corporations engaged in tax avoidance with a $2.6 trillion tax cut.
The Moores did not receive any distributions or payments because they did not want to receive any taxable distributions or payments. That's the scam, to make it look, on paper, like they aren't earning anything while their portfolio grows. Meanwhile, they are free to leverage that value in the form of loans.
This is not a fight between the big bad IRS and a mom and pop investor just trying to make ends meet. This is international oligarchs hoarding wealth in tax shelter nations, and if the SCOTUS rules in their favor, it's going to come out of taxpayer pockets.
That is an excellent writeup, but misses the key argument:
is really just a fancy way of differentiating "realized" income (where an asset was sold for more than you paid to buy it, and you have the profit in hand) vs. Unrealized Income (where an asset is valued at more than what you paid to buy it, but you haven't sold it yet). It is more of a burden to tax unrealized income, because some unrealized assets aren't able to be sold easily and applying a tax to those may force those assets to be sold early if the tax is high enough.
So while it creates loopholes where the wealthy can structure their businesses so they take a very low personal income while financing much of their lifestyle from their unrealized assets, there is also an element of fairness in it: imagine the shitshow if you had to pay extra every year if you owned a house outright but the property values kept going up?
The answer is in the plain text of the 16th amendment, though:
Where it gives the Congress power to collect taxes on all incomes, full stop, without regard to whether they are realized or not. Congress does tax unrealized income, after all, such as on estates, they just do it with a large amount of restraint because they know that it's not always appropriate.
And while normally we can count on this Conservative court to vote in favor of the plain text in the Constitution, I am not so sure on this one. Perhaps the writers of the amendment should have had the forethought to throw a "shall not be infringed" in there, since those are the only words some Conservatives know in the Constitution.
"imagine the shitshow if you had to pay extra every year if you owned a house outright but the property values kept going up"
Like property taxes, then. ;-)
Realistically, I understand the issue. If I had to pay taxes on the increase in price on my house (say from a $300k valuation three years ago to a $500k valuation after the market bubble), I'd be fucked to find 15% of that overnight. Of course, if they allowed that to be offset by the primary residence exemption, it would be a zero cost. Without that, it would still be a non-issue for 95% or more of US taxpayers because most people simply don't own an illiquid asset that increases in capital value (much less an international one), and if you exclude secondary real estate that non-issue number probably increases to more then 99.9%.
Where the fuck is the property tax rate 15%?? Highest in the US is still less than 3%.
https://www.rocketmortgage.com/learn/property-taxes-by-state
I faced this exact scenario. I bought my house in Nov 2019 - right before the giant pandemic price increase. It's gained $200,000 in value and my property taxes went up by $200/month. Which at my income level is not an absurd burden.
I don't think we should have owner occupied exemptions on property tax, and I'm happy to pay my share of that tax to keep my city functioning. I DO think we should have burdensome sales/transfer taxes on non-occupying owners.
The property tax was separate, and it happens regardless. The 15% is the long term capital gain rate - if the value of an asset increases (say 300k->500k) I have a 200k gain. I don't pay tax on that 200k until I sell, but if there were an in-process gain tax, I would. So instead of owing taxes on my profit/gain when I sell, I would pay the gain each year (and carry over a loss if the value of the house decreased). Coming up with 30k (200kx15%) would be a tough think to do simply because my neighborhood got popular in the Real Estate market.
Oh sorry, I thought you were talking about current taxes, not a hypothetical future wealth tax. Of course a wealth tax should exempt one primary owner occupied property until sold.