SAFE Files Amicus Brief Urging Supreme Court to Protect Americans From Taxes on Unrealized Gains

Brief Prepared By Former Obama Administration Acting Solicitor General Neal Katyal, Co-Signed By Former U.S. Senator John Breaux.

Washington, D.C.  September 7, 2023  Saving America’s Family Enterprises (SAFE)–a nonpartisan organization dedicated to educating the public about the risks of proposals that complicate the tax code–has filed an amicus brief with the Supreme Court in Moore v. United States seeking to protect Americans and family businesses from being taxed on their unrealized income.

SAFE’s amicus brief was co-signed by former U.S. Senator John Breaux–a spokesman for the organization–and prepared by former Obama administration acting solicitor general Neal Katyal of Hogan Lovells.

In June, SAFE applauded the Court’s decision to take up the Moore case. The amicus brief urges the Court to protect the integrity of the progressive tax code and uphold that gains must be realized to be taxed as income under the Sixteenth Amendment:

“The Sixteenth Amendment tethers income to realization for good reason…  [It] allows the government to sidestep complicated valuation questions, ensures that taxpayers have the liquidity to pay their taxes, and encourages economic growth.  Severing income taxation from realization… throws all that out the window.”

The brief outlines the economic consequences of taxes on unrealized gains–particularly for family businesses, which would face annual liquidity crises: 

“Assessing annual changes to illiquid assets is expensive to do and incredibly hard to do well… Responsible taxpayers will start their valuations from scratch each year, and the burden will fall most heavily on family businesses with substantial plant and equipment, intellectual property or other illiquid assets.”

SAFE’s brief also details how taxes on unrealized gains would be unworkable for the IRS and further undermine the government’s ability to close the tax gap: 

“Accurately valuing trillions of dollars of assets every year would be difficult for any organization.  But the IRS, a perennially underfunded, understaffed, and under-resourced agency, is particularly ill-suited to the task. … [T]he administrative costs of valuing opaque assets with antique technology and then defending those valuations year after year could foreseeably lead the IRS to de-prioritize shrinking the income tax gap.  Given the size of that tax gap—which is only growing larger—the result will almost certainly be less money in the federal coffers…”

According to research cited by the IRS, the U.S. loses tax revenue it is owed under existing tax law at a level equivalent to 3 percent of GDP.

Read SAFE’s full amicus brief here

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See how taxing unrealized gains could impact American families.