An influential thinktank closely linked to two billionaires who provided lavish travel gifts to conservative supreme court justices is behind a successful lobbying campaign to get the US high court to take on a case that could protect them and other billionaires from a possible future wealth tax.
The Manhattan Institute was one of eight conservative advocacy groups that filed amicus briefs urging the supreme court to take on Moore v US, a $15,000 tax case that Democrats have warned could permanently “lock in” the right of billionaires to opt out of paying fair taxes.
The billionaire hedge fund manager Paul Singer is chairman of the Manhattan Institute and Kathy Crow, who is married to the real estate mogul Harlan Crow, serves as a trustee of the group. Both have provided two of the justices – Samuel Alito and Clarence Thomas, respectively – with private travel gifts and have socialised with the judges on lavish vacations, according to reports in ProPublica and other media outlets.
The revelations have stoked serious accusations of ethical and legal violations by the two rightwing justices, who failed to disclose the travel and – in Thomas’s case – hundreds of thousands of dollars in additional gifts from the Crows, including property purchases and private tuition payments for Thomas’s great-nephew.
Thomas has called the Crows his “dearest friends” and claimed Harlan Crow “did not have business before the Court”. Alito has said he could recall speaking to Singer only on a “handful of occasions” and that the two had never discussed Singer’s business or issues before the court.
But Alito and Thomas’s dealings with the conservative billionaires have nevertheless raised questions about how the justices’ close ties might influence which cases are taken on by the court.
The supreme court announced it would hear Moore vs US on 26 June. On its face, the case appears to be centered on a relatively minor tax dispute between Charles and Kathleen Moore, a Washington-state couple, and the US government.
Charles Moore spent most of his career as a software engineer at Microsoft, where he met one of the future founders of KisanKraft, a company that provides low-cost tools to farmers in India.
In 2006, the Moores invested about $40,000 in KisanKraft. The investment gave them an 11% stake in the company, which made profits but did not pay dividends, the Moores said.
In 2017, the Trump administration passed the Tax Cuts and Jobs Act, a law that contained a one-off levy on US corporations’ foreign earnings – the Mandatory Repatriation Tax (MRT). It was estimated that MRT would raise $340bn in tax revenue. To the Moores’ chagrin, it also created an unexpected $15,000 tax liability in connection to their KisanKraft holding.
The tax was unfair and unconstitutional – they argue – because they never realized any gains from the investment. In a video interview of the couple created by the rightwing Competitive Enterprise Institute (CEI) – which took on a key role in the legal matter – the couple explain their decision to take legal action.
The only “return” the couple had made, Kathleen noted, was knowing that the company was helping and reaching people “all over India”. “We are doing this because we strongly believe in the rule of law in this country,” said Charles.
The couple enlisted the help of the CEI and one of the most powerful and well-connected law firms in Washington, BakerHostetler, whose clients have included Boeing, ExxonMobil and Major League Baseball, and sued the US government.
While the investors are portrayed as average, upper-middle-class Americans who stumbled upon the tax issue, records show they had prior connections to CEI.
Moore’s father, Thomas Gale Moore, is an economist with ties to CEI, where he is listed on their website as an “expert”. Thomas Moore served on Ronald Reagan’s council of economic advisers and at the conservative Hoover Institution, where he focused on economic and environmental policy. He also authored a 2001 book titled Climate of Fear: Why we shouldn’t worry about global warming, which was published by the Cato Institute, a libertarian thinktank that also submitted an amicus brief in the Moore case.
In a sworn 2020 deposition, Charles Moore said he had never received a “distribution, dividend, or other payment from KisanKraft”. Financial documents seen by the Guardian suggest Moore has, however, sold shares in the company. He appears to have sold stock on three occasions – about 23% of his total holding – shortly before filing his 2019 lawsuit.
A lawyer for Moore did not respond to questions about Moore’s father’s ties to the CEI or the share sale, which occurred after he received the tax bill.
The Moores’ arguments were rejected by lower courts, with the ninth circuit court of appeals ultimately declining in 2022 to rehear their case. In its decision, the court said that the realization of income “does not determine whether a tax is constitutional”.
But the Moores assert the MRT violates the 16th amendment of the US constitution, which gives Congress the power to “lay and collect taxes on incomes, from whatever source derived”, that argument could ultimately upend the US tax code and “slam shut the door on a federal wealth tax”, as the couple’s lawyer noted in a Wall Street Journal editorial.
Four supreme court justices must agree to grant certiorari – or cert, as it is known – for it to be heard. The justices’ votes are not public but legal experts have argued that the court was unlikely to take the case simply to reaffirm the ninth circuit’s decision and that it seemed likely the conservative justices would have voted to take the case in order to send a signal to Congress with their ruling.
Democrats, led by the Senate finance committee chairman, Ron Wyden, have proposed a “billionaire tax” that would target gains billionaires make on stocks and other unrealized assets. Any ruling by the supreme court that stated that taxes on unrealized income is unconstitutional could – in theory – make such a “wealth tax” hard to pass, experts say.
Even if the Moores lose the case, a narrow ruling that questions Congress’s ability to impose taxes like the MRT could kill plans for a billionaire tax by making clear that the conservative-led supreme court would reject an attempt by Congress to tax unrealized gains.
“The Moores are not the real parties of interest [in this case]. The billionaires financing the litigation are the real parties of interest,” said Steven Rosenthal, senior fellow at Urban-Brookings Tax Policy Center.
“There are so many different variations of what could be income,” said Rosenthal. For the past 100 years, he said, the definition of what gains were taxable has been treated as an administrative issue for Congress and not as a constitutional issue for the supreme court to decide.
He said the case raised questions about whether the Moores’ seemingly narrow tax dispute could be a “stalking horse” case that will ultimately be a boon for billionaires.
“The billionaires don’t care whether the Moores are taxed or not. Musk, Zuckerberg and all the other billionaires out there start these companies and have all these unrealized gains on their stock investments. And they are threatened by the Warren and Wyden wealth taxes that might tax unrealized gains,” said Rosenthal.
“For the supreme court to reach out and take a case that is not really a controversy is tremendously dangerous,” he said. “Why are the billionaires being able to pull the strings of the US supreme justices like puppets?”
Among the top lawyers representing the Moores is David Rivkin at BakerHostetler, who also represents the rightwing judicial activist Leonard Leo in connection to a criminal investigation into Leo-affiliated non-profits that Politico reported has recently been launched by the Washington DC attorney general, Brian Schwalb.
Public records show that Leo – who raises and distributes funds to a network of conservative and rightwing advocacy groups that seek to influence the courts, and had a personal role in choosing the rightwing justices who have been nominated and confirmed since the Bush administration – has connections to each of the eight advocacy groups that filed briefs in the Moore case.
Rivkin did not respond to questions from the Guardian about the appearance of coordination between the groups, which all filed their briefs on 27 March.
Rivkin also has a relationship with Alito, who he interviewed for two stories that were published by the Wall Street Journal’s editorial page, which centred on Alito’s grievances with journalism that has exposed his relationship with Republican donors, and the Senate’s desire to address the justices’ violations of disclosure laws.
Richard Durbin, the Democratic chairman of the Senate judiciary committee, recently raised concerns about Rivkin’s involvement in the articles, saying his access to Alito, and efforts to help him “could cast doubt on Justice Alito’s ability to fairly discharge his duties in a case in which Mr Rivkin represents one of the parties”.
The Manhattan Institute did not respond to questions about its brief. A spokesperson for Singer’s hedge fund, Elliot Management, declined to comment. Michael Bopp, a partner at Gibson, Dunn & Crutcher representing the Crows, did not respond to a request for comment.
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