The Supreme Court leaves a Trump-era offshore tax in place on investors

The U.S. Supreme Court on Thursday ruled against a couple who challenged the constitutionality of a Trump-era tax provision, handing the government a victory in a case that had huge potential consequences for the federal budget.

At issue was a tax enacted in 2017 to pay for President Donald Trump’s massive corporate tax cut and to prevent off-shore tax dodges. It was challenged by Charles and Kathleen Moore, who were required to pay a one-time $15,000 tax on an investment in India that grew in value from $40,000 to over a half million dollars.

Backed by conservative anti-regulatory groups, the couple claimed that because they had received no payments or dividends from the company, there was no income to be taxed. And they maintained that the tax violated the 16th Amendment to the Constitution, enacted in 1913, which authorizes Congress to collect taxes on income.

This tax, they maintained, was not on income, and thus was unconstitutional.

But the Supreme Court disagreed by a vote of 7-2, with Justice Brett Kavanaugh writing for the court's majority. He was joined by Chief Justice John Roberts, Justices Amy Coney Barrett, Samuel Alito, Elena Kagan, Sonia Sotomayor and Ketanji Brown Jackson. Justices Neil Gorsuch and Clarence Thomas dissented.

Although on paper the case appeared obscure, it had potentially trillions of dollars in tax consequences for the federal budget, and an adverse decision could have severely limited congressional options in enacting tax policy.

Indeed, former Republican House Speaker Paul Ryan, who shepherded the tax through the House of Representatives, warned that if the tax were invalidated, it could unravel a third of the tax code.

Congress enacted the tax as a one-time payment to cover the