The failure today of the Supreme Court to unequivocally preclude a so-called “wealth tax” will put a spring in the step of Marxists like Senator Warren who are eager to find more ways to extort more money from the long-suffering citizenry. That’s even though the Nine, in an opinion written by Justice Brett Kavanaugh, insist that the seven to two ruling in Moore v. United States has no bearing on the question of taxing the wealth of Americans. 

“Potential issues for another day,” is how Justice Kavanaugh waves away the concern over a wealth tax. In a kind of accounting shorthand he dismisses it as a “disagreement over realization.” That pat formulation glosses over the substantial danger presented in Moore. After all, for more than a century it’s been a hallmark of the American tax code that income on investment gains is taxable when it is “realized” — that is, when the asset is sold.

That understanding is what prompted Charles and Kathleen Moore of Washington State to challenge the tax bill they got from the IRS on an overseas investment that hadn’t yet yielded them any returns. How, they wondered, could they be assessed a tax on nothing? The culprit was what the IRS called a “Mandatory Repatriation Tax,” said to be a one-time affair, levied by Congress in 2017 on the overseas profits of American companies.

The Moores argued that this tax is unconstitutional, pointing to a case the Supreme Court decided in 1920, Eisner v. Macomber. That’s when the court found that only “realized gains” are taxable income. Justice Kavanaugh’s opinion sidesteps that question by stressing that “our holding today is narrow.” It applies, he insists, only to the profits “realized” by “pass-through” businesses, like partnerships, but not yet passed on to the owners of the business.

Not so fast, says Justice Clarence Thomas, joined by Justice Neil Gorsuch, in a dissent that exceeds in pages the length of the majority opinion. How can the Moores be levied a tax “on an investment that never yielded them a penny,” Justice Thomas asks. He finds the couple “correct” when they aver “that a tax on unrealized investment gains is not a tax on ‘incomes’ within the meaning of the Sixteenth Amendment.”

That, the senior jurist on the high court explains, means the riders of the Ninth Circuit “wrongly rejected the Moores’ challenge.” Here Justice Thomas zeroes in on the peril of the majority opinion, as the circuit riders had observed that “realization of income is not a constitutional requirement.” The riders’ reasoning opens the door to other taxes on the current value of assets — like cars, homes, or even securities — held, but not sold, by taxpayers.

Justice Thomas reasons that the majority preserves the Mandatory Repatriation Tax “only by ignoring the question presented.” That’s because when the 16th Amendment — an error greater than even the 18th Amendment’s ban on alcohol — allowed Congress to levy an income tax, it created what Justice Thomas calls “a new constitutional distinction between ‘income’ and the ‘source.’” That in turn, he explains, “necessitates a realization requirement.” 

The left’s effort today to erase that requirement is framed as a matter of fairness, as Ms. Warren puts it. “When you make it big, bigger than $50 million dollars,” she says, “then on that next dollar, you pitch in two cents, so everyone else can have a chance.” Ms. Warren’s rhetoric is a reminder that the income tax itself was presented by the Progressives of the day as a burden that would only reach the wealthiest Americans. 

When it went into effect, the rate was but 1 percent. And that only on incomes higher than $3,000 a year — the equivalent today of about 96,000 of our degraded dollars. Fewer than one percent of Americans were liable to pay any income tax at all. By 1940, the top marginal tax rate had soared to 81 percent, and by 1960, it was 91 percent. A wealth tax could all too easily follow that course. It’s not merely an issue “for another day” but a clear and present danger.