Top Dems Press Supreme Court To Block Billionaire Tax

To pressure the Supreme Court into permanently blocking a wealth tax on the superrich, deep-pocketed interests are pulling out all the stops — including employing top Democrats to plead their case. In today’s featured story, Julia Rock exposes how a top Obama lawyer-turned-MSNBC mainstay and a Democratic senator-turned-lobbyist are helping a dark money group try to sway the court in a potentially landmark tax case.

Rock the boat.

President Obama’s former acting Solicitor General Neal Katyal speaking outside the U.S. Supreme Court (AP Photo/Andrew Harnik)

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The former Supreme Court lawyer for the 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 Obama 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 seemingly obscure corporate taxation case to elicit a broad ruling that outlaws all wealth taxes. 

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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 Sen. John Breaux (D), 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, 34 Democratic senators have signed onto 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 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 healthcare and education.

While there is virtually no chance of a wealth tax passing in the Republican-led House of Representatives, major corporate lobbying groups and right-wing think tanks are asking the Supreme Court to preemptively rule that such a tax would be unconstitutional, in a case involving an unrelated one-time levy on foreign corporate earnings imposed in 2017.

The case in question, Moore v. United States, deals with a challenge to the “mandatory repatriation tax,” a $340 billion provision in the 2017 GOP tax law. The mandatory repatriation tax mostly applied to major corporations, but also affected the small number of Americans who have a larger than 10 percent stake in an offshore corporation.

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.

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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 reminded readers, “I was an acting solicitor general for President Barack Obama,” and noted that despite his liberal bonafides, 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,” that costs more than $40 billion annually and overwhelmingly enriches the wealthy, in order to help fund his legislative agenda. 

The tax revenue would have partially offset spending in Democrats’ signature Build Back Better legislative package, which proposed funding universal preschool, making community college free, adding hearing benefits to Medicare, extending the expanded child tax credit, and other transformative welfare proposals. 

SAFE hired former Sen. Heidi Heitkamp (D-N.D.) to defend the tax loophole, just months after she called it “one of the biggest scams in the history of forever on income redistribution.”

Democrats did not close that loophole, and they ultimately allowed key social safety programs that were expanded during the COVID-19 pandemic to expire, causing the U.S. child poverty rate to more than double last year and poverty to spike overall.

This year, SAFE launched a multi-million dollar ad campaign opposing Democratic proposals to tax the wealth of people worth more than $100 million, with Breaux, the former Louisiana senator, serving as the group’s figurehead. 

“If you want to raise money, there’s a lot of ways to do it but you don’t want to do something that is bad policy,” Breaux told Roll Call about the wealth tax proposals. The new ad campaign, he said, was aimed at educating people about the proposals that Democrats had pitched as billionaire taxes: “We can’t let slogans rule the day.”

One of SAFE’s new ads claims that “the government will guess at the increased value of everything you own, and tax you on that guess every year — your home, savings, retirement account.”

Breaux, who served in Congress from 1972 to 2005, was a member of the New Democrat Coalition that had backed Clinton’s neoliberal agenda. After leaving Congress, he became a corporate lobbyist — as many corporate Democrats do. Breaux is now a senior partner and director at the lobbying firm Crossroads Strategies.

SAFE’s board of directors includes two corporate lobbyists: Missy Edwards and David Lehman. Edwards lobbies for General Motors, the real estate industry, and electric utilities, while Lehman lobbies for defense contractors.

SAFE employs Forbes Tate, a lobbying firm run by former officials from President Bill Clinton’s administration that has coordinated the health care industry’s campaign against Medicare for All.

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