The Moores argued that since they never realized any income from their ownership stake in KisanKraft, the Mandatory Repatriation Tax cannot be an “income tax.” And there is no dispute that the Mandatory Repatriation Tax was not apportioned among the states on an equal per capita basis, so if it is not an income tax, it is unconstitutional.

But a federal district court and the Court of Appeals for the Ninth Circuit both rejected this argument, holding that the Mandatory Repatriation Tax is an income tax. Surprisingly, the Ninth Circuit explicitly held that realization of income is not a requirement for an income tax. Now the Moores have petitioned the Supreme Court to take their case, and the Cato Institute has filed an amicus brief supporting that petition.

[This is a prelude to efforts to make unrealized capital gains taxable in other areas. While this seems like an arcane debate, it could have devastating consequences. — Ed]