An Unconstitutional Income Tax Without Income
Thomas A. BerryCan the government impose an income tax when you never had income? That may seem like a trick question, but it ’s exactly what happened to Charles and Kathleen Moore. In 2006, the Moores invested in a start ‐up Indian company called KisanKraft, whose goal was to provide low‐cost, efficient tools to rural Indian farmers. The Moores believed in KisanKraft’s mission and retained their shares of KisanKraft for over a decade, never selling it for a profit. And KisanKraft reinvested all of its own profits in the company, never paying dividends. For that reason, the Moores never saw a dollar from their investment.Yet in 2017, the Moores suddenly received a hefty federal tax bill for their ownership stake in KisanKraft. How could that be, if they never earned any money from their holdings? The reason is a provision of the 2017 Tax Cuts and Jobs Act called the Mandatory Repatriation Tax. For U.S. taxpayers who met a certain minimum threshold of ownership in certain foreign corporations, the Mandatory Repatriation Tax imposed a tax billas ifthose taxpayers had earned a 2017 dividend from the corporation for profits going back years. Because the Moores owned roughly 13 percent of KisanKraft shares, they were taxedas ifKisanKraft had paid them a 2017 dividend worth 13 percent of KisanKraft ’s earnings since 2006. Even though that 2017 dividend was fictional, their tax bill was very real.The Moores chall...
Source: Cato-at-liberty - Category: American Health Authors: Thomas A. Berry Source Type: blogs
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