Justices Have Financial Interest In Major Tax Case

Congressional ethics laws require Supreme Court justices to recuse themselves from decisions when they have a stake in the companies that are parties to the case. But as Julia Rock reveals in today’s featured story, Chief Justice John Roberts and Justice Samuel Alito are planning to take part in a pivotal tax case next term, even though they own at least hundreds of thousands of dollars worth of stock in companies that could score big from their resulting decision.

Rock the boat.

Supreme Court Chief Justice John Roberts and Justice Samuel Alito. (AP Photo/J. Scott Applewhite)

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Two Supreme Court justices own shares of companies that could see tens of billions of dollars in tax relief from the outcome of a case that the high court will rule on next term. While the justices have not recused themselves from the case and their financial interests don’t explicitly violate existing judicial ethics laws, progressives and court watchdogs are demanding their recusal.

According to a review of public company documents and judicial financial disclosures, Chief Justice John Roberts and Justice Samuel Alito together own shares in 19 companies that could see combined tax relief of more than $30 billion if the court issues a broad ruling in the Moore v. United States tax case and strikes down a one-time corporate tax imposed in 2017. 

“In Moore, the Roberts Court could decide with the stroke of a pen to simultaneously forgive big business decades of tax dues in the billions; increase the federal deficit; jeopardize future public revenue and essential social programs; aggravate the disadvantages facing domestic, taxpaying competitors; escalate these multinational companies’ already sizeable after-tax profits; and further enrich their shareholders,” notes a new report from the Roosevelt Institute and the Institute for Taxation and Economic Policy, which conducted the analysis of Roberts and Alito’s financial interests in the case.

The high court did not respond to a request for comment. 

The Moore case is a challenge to a provision in the 2017 GOP tax law that imposed a levy on the deferred foreign earnings of some corporations, and on individuals with substantial stakes in those corporations. The so-called “mandatory repatriation tax” was supposed to raise $340 billion in revenue, helping offset the bill’s tax cuts for the wealthy and corporations.

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The petitioners, plus the conservative and Democrat-aligned groups backing them, are challenging the tax’s impact on individual shareholders, with the broader goal of winning a ruling that preemptively blocks Congress from imposing a wealth tax. But the court’s decision could also provide $271 billion in tax relief to nearly 400 multinational corporations, according to the new report.

Ethics laws written by Congress require justices to recuse themselves when they have a financial interest (such as owning stock) in companies that are parties to the case. 

Alito and Roberts have recused themselves from more than 200 cases combined over the past five years, and in many cases they appeared to recuse themselves due to financial conflicts created by their stock holdings (although justices typically do not give reasons for recusal). They are the only two justices to own individual stocks. 

All of the other seven justices own shares of passive investment funds that track the stock market, which have high exposure to the companies that were hit by the mandatory repatriation tax; the companies most affected by that tax, including Apple, Microsoft, Pfizer, Johnson & Johnson, and Google, sit at the top of the Fortune 500.

But none of those companies are party to the Moore case, brought by two individuals in Washington state, meaning judicial ethics laws don’t explicitly require the justices to recuse themselves.

Congress should reconsider the fact that current recusal laws don’t directly apply to situations like this one, said Gabe Roth, executive director of the judicial reform nonprofit Fix the Court. 

“A goal of federal recusal laws is to ensure that you are not profiting from your judicial decision making,” said Roth. “In this case, it appears very likely that some justices might be doing exactly that.”

“It’s Hard To Tell Where The Roberts Court Would Draw The Line”

The Moore v. United States case challenges a tax that was imposed on corporations and on individual shareholders of those corporations. But the case is primarily focused on the levy imposed on individuals — because its broader aim is winning a Supreme Court ruling that blocks Congress from imposing a wealth tax, recently proposed by Democrats in various forms to tax the assets of the ultrarich.

The levy was largely uncontroversial when Republicans passed their broader tax bill in 2017, with the support of major corporate lobbying groups including the U.S. Chamber of Commerce. But the mandatory repatriation tax’s application to a small number of individual shareholders spurred the legal challenge.

The couple that brought the case, Charles and Kathleen Moore of Washington state, argue that taxing individuals on corporate income that had not yet been distributed to them as dividends is unconstitutional. Their arguments are aimed at preventing Congress from taxing “unrealized” income in the form of a wealth tax.

The Moores, and the conservative legal movement boosting them, are challenging the aspect of the tax that impacted individuals, not the overall corporate income tax. 

“A victory for the Moores — under existing doctrine — would not affect the tax liability of Apple, Microsoft, or any of the other corporations mentioned in the report,” Daniel Hemel, New York University Law professor and corporate tax expert, told The Lever.

But the authors of the new report argue that the Supreme Court could still strike down the entire tax. 

“As we know with this court, they haven’t been immune to taking broader and more activist approaches to their cases,” said report co-author Niko Lusiani of the Roosevelt Institute. “It’s hard to tell where the Roberts Court would draw the line in this case.”

Such a ruling would impact companies in which Alito and Roberts own substantial shares. According to his 2022 financial disclosures, Roberts owns between half a million and a million dollars worth of shares in Thermo Fisher Scientific, a medical technology company which could receive a $1.4 billion tax break if the court annuls the mandatory repatriation tax. He owns up to $250,000 worth of Lam Research, a semiconductor company that could see $868 million in tax relief.

Alito owns shares in 17 companies that would see almost $30 billion in relief if the court strikes down the tax, including up to $50,000 in the pharmaceutical giant Johnson & Johnson, which could see over $10 billion in tax relief. Alito recused himself from a 2021 petition involving Johnson & Johnson; that case could have overturned $2.1 billion in damages owned by the company.

“The real-world conflict of interest is not weaker just because a benefitting company is not listed as a plaintiff,” the report argues. “Neither benefit nor bias changes because certain beneficiaries are not listed as petitioners.”

Hemel noted that it’s not just Alito and Roberts who could be financially impacted by the outcome. 

“Every Supreme Court justice holds investments in index funds that are heavily weighted toward Microsoft and Apple — after all, those two companies compose approximately 14 percent of the S&P 500,” he said.

Democratic senators have already demanded Alito recuse from the case due to his personal ties to the Moore petitioners’ lawyer, David Rivkin Jr.

Alito twice granted interviews to Rivkin for Wall Street Journal columns defending Alito. “‘I marvel at all the nonsense that has been written about me in the last year,’ Justice Samuel Alito says during an early July interview at the Journal’s New York offices,” Rivkin and Wall Street Journal editor James Taranto wrote in a July column for the paper headlined: “Samuel Alito, the Supreme Court’s Plain-Spoken Defender.”

“Mr. Rivkin’s access to Justice Alito and efforts to help Justice Alito air his personal grievances 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,” wrote the ten Democrats on the Senate Judiciary Committee in a letter to Roberts. 

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The letter noted Rivkin’s interest in the ethics scandal involving Alito and hedge fund billionaire Paul Singer. ProPublica reported in June that Alito accepted a private jet flight from Singer in 2008 for a fishing trip in Alaska and never disclosed the gift, apparently violating federal disclosure laws. Alito later ruled in at least 10 cases involving Singer’s hedge fund. 

Conservative legal activist Leonard Leo, known for building the GOP’s Supreme Court supermajority, reportedly arranged the fishing trip as well as Alito’s seat on Singer’s jet. Rivkin is now representing Leo amid a probe into his donor network. 

“The relationship between Justice Alito and Mr. Rivkin is also concerning because Mr. Rivkin is counsel for Leonard Leo with regard to this committee’s investigation into Mr. Leo’s actions to facilitate gifts of free transportation and lodging that Justice Alito accepted,” the senators’ letter said.

Alito refused the calls for his recusal, arguing: “When Mr. Rivkin participated in the interviews and co-authored the articles, he did so as a journalist, not an advocate.”

Think tanks with financial ties to Singer and Justice Clarence Thomas’ billionaire benefactor Harlan Crow have filed amicus briefs in the case urging the Supreme Court to side with the Moores. 

As billionaires, Singer and Crow both have a financial interest in staving off efforts by Congress to tax the wealth of the ultrarich.

Singer is the chairman of the Manhattan Institute, which argued in a recent brief that the mandatory repatriation tax is both “harmful” and “unconstitutional.” The Paul E. Singer Foundation has donated more than $7 million to the institute since 2010.

Philanthropy Roundtable, which has received $850,000 from Singer’s foundation since 2010, also filed a brief in favor of the Moores. 

“A broad and relatively unfettered power to tax unquestionably affects philanthropy,” the Philanthropy Roundtable brief argued. “Not only is the [mandatory repatriation tax] unconstitutional… it is unwise and dangerous to American philanthropy.”

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