Some Democrats Are Trying to Preemptively Outlaw a Billionaire Tax
Neal Katyal, formerly the Obama administration's Supreme Court lawyer, seeks to outlaw all federal wealth taxes. (Eva Marie Uzcategui / Bloomberg via Getty Images)
Sensing its popularity, Obama’s former Supreme Court lawyer and a Louisiana Democrat are using an obscure corporate taxation case to try to make a federal wealth tax illegal before it even exists.
by JULIA ROCK
The former Supreme Court lawyer for the Barack Obama administration and a Democratic senator-turned-lobbyist are pressuring justices to block Congress from ever instituting a wealth tax on the superrich, according to court filings reviewed by the Lever.
Former acting solicitor general Neal Katyal recently submitted an amicus brief in the Supreme Court case Moore v. United States on behalf of the group Saving America’s Family Enterprises (SAFE). That anonymously funded group — whose board includes corporate lobbyists — has spearheaded campaigns against Democrats’ efforts to tax the inheritances and wealth of millionaires and billionaires.
Now the group is aiming to use the obscure corporate taxation case to elicit a broad ruling that outlaws all wealth taxes.
Katyal is an MSNBC mainstay who came to prominence as a liberal defender of Republican president Donald Trump’s Supreme Court nominees, all of whom will now rule on the case. In recent years, Katyal has helped Nestlé defend itself in a child slavery case before the Supreme Court and represented Johnson & Johnson in its bid to use bankruptcy to block lawsuits from cancer victims.
Listed on the Katyal-authored amicus brief alongside SAFE is the group’s senior adviser, former Louisiana Democratic senator John Breaux, who also lobbies for ExxonMobil, Norfolk Southern, and Boeing — corporations whose top executives could have a financial interest in the outcome of the case. Breaux also lobbies for billionaire financial magnate and Democratic megadonor James Simons.
SAFE is organized as a so-called social welfare nonprofit, which allows it to hide the identity of its donors and avoid taxes while spending money to influence policy decisions.
In response to recent ethics scandals at the Supreme Court, thirty-four Democratic senators have signed legislation that would require organizations filing amicus briefs to disclose their donors. But because that bill is stalled, SAFE can pressure the Supreme Court to block a wealth tax while refusing to disclose its benefactors.
SAFE did not respond to a Lever request for a list of its donors.
Katyal v. Billionaire Tax
Democratic lawmakers and the Joe Biden administration have touted a wealth tax as a way to tackle record levels of inequality and fund programs that slash poverty and expand access to health care and education.
Two such Americans, Charles and Kathleen Moore of Washington State, sued, arguing that the mandatory repatriation tax was unconstitutional.
If the Supreme Court strikes down that tax, it could create a multibillion-dollar windfall for major corporations — and eliminate one of the only revenue-raising provisions in the 2017 law that otherwise cut taxes for the wealthy and businesses.
But the Moore petitioners have another goal as well: preempting Congress from ever instituting a federal wealth tax. They want the court to rule that income must be “realized” in order for it to be taxable under the Constitution — in other words, that an asset needs to be sold in order for its value to be taxed.
In practical terms, if the high court decides that “realization” is part of the definition of “income” — a radical divergence from precedent, but also a real possibility from the right-wing bench — wealth tax proposals like those opposed by SAFE could be deemed unconstitutional.
Though Democrats’ wealth tax proposals have narrowly targeted the superrich, SAFE’s brief insists that they represent an attack on mom-and-pop businesses and working families.
“Although these proposals initially take aim at economic elites, history teaches that a tax on the unrealized gains of middle-class Americans is not far behind,” Katyal wrote in the amicus brief for SAFE, adding that the existing repatriation levy is “an unworkable and counterproductive tax scheme that will, in addition to saddling individual taxpayers with complicated new taxes, unfairly burden family businesses.”
Katyal did not respond to a request for comment.
Katyal could be a particularly persuasive voice for SAFE at the high court; he did favors for three of the conservative justices by using his platform and Obama administration credentials to rally liberal support for their confirmations. That was especially true for Justice Neil Gorsuch, who in 2017 faced a roadblock from Democrats who were angry that Republicans had filibustered Merrick Garland’s nomination until Trump took office.
Katyal came to Gorsuch’s defense in a New York Times op-ed headlined “Why Liberals Should Back Neil Gorsuch.”
Katyal reminds readers, “I was an acting solicitor general for President Barack Obama,” and notes that, despite his liberal bona fides, he endorsed Gorsuch and his “commitment to judicial independence.” Katyal introduced Gorsuch at his subsequent confirmation hearing.
In 2018, after Trump appointed Justice Brett Kavanaugh, Katyal said it was “very hard for anyone who’s worked with him, appeared before him to, frankly, say a bad word about him.” Republicans touted Katyal’s praise for Kavanaugh as they moved to confirm him.
Of Justice Amy Coney Barrett, Katyal said, “I think you’ll hear many Democrats acknowledge she’s a brilliant person, she’s a lovely person.”
In response to criticisms that Katyal should have disclosed potential conflicts of interest in his pro-Gorsuch op-ed, since such praise could curry favor for him in future high court appearances, Katyal told the New York Times, “It is a matter of public record that I am a Supreme Court lawyer and naturally will have matters pending before that court. . . . It would be completely speculative to presume what a nominee might do as a justice in any particular case.”
Democrats v. Billionaire Tax
SAFE’s amicus brief is the latest move in a yearslong campaign to protect the assets of wealthy people from taxation. The group was launched in 2021 to preserve a tax loophole that the wealthy use when bequeathing assets worth more than $1 million to their children.
Biden had proposed limiting the tax loophole, known as “stepped-up basis,” which costs more than $40 billion annually and overwhelmingly favors the wealthy, in order to help fund his legislative agenda.