McGuigan in National Review: A Tax on Unrealized Gains Would Hurt Philanthropy

In an op-ed published in National Review ahead of oral arguments in the Moore v. United States case, Philanthropy Roundtable Senior Vice President Elizabeth McGuigan laid out the potential consequences to the philanthropic sector if the Supreme Court rules a tax on unrealized gains is constitutional.  

Below are excerpts from the article entitledA Tax on Unrealized Gains Would Hurt Philanthropy :  

“The case of Charles and Kathleen Moore centers on an investment the couple made in a company empowering small-scale farmers, but now leaves them facing a $15,000 tax bill even though they’ve seen no profit from their investment. Moore v. United States sheds light on the tangible consequences of implementing taxes on unrealized gains. The ultimate ruling by the U.S. Supreme Court on this matter could lead to dire outcomes for the philanthropic community, with the potential to undermine the transformative work nonprofits do across the nation. 

Referred to as the Mandatory Repatriation Tax (MRT), the tax obligated the Moores to declare additional taxable income based on gains that had not yet materialized. The Moores petitioned the U.S. Supreme Court challenging the constitutionality of the tax. 

If the Court rules the tax is constitutional, it would set a legal precedent for a wealth tax, which often takes the shape of a tax on assets rather than on income. When both the Constitution and 16th Amendment were drafted, the concept of taxation was based on principles of restraint and predictability. This was grounded in a profound belief in the intrinsic value of safeguarding the private sphere, an area that encompasses philanthropy and is a necessary counterbalance to government. The unchecked and expansive authority to levy taxes on income that has not even been realized carries the potential to cast a shadow on the realm of philanthropy.”  

… 

“As Philanthropy Roundtable wrote in our amicus brief filed with the Supreme Court, “A wealth tax on private charitable foundations would be a disaster for charitable giving. If the foundation’s assets are attributed to the ‘heads’ of the organization, as in Sen. Bernie Sanders’s (I-VT) plan, then charitable foundations like the Bill and Melinda Gates Foundation — which has spent approximately $40 billion on global development and global health programs — could owe an annual tax of 24.4%.” This reduction in resources would hamper the ability of charitable organizations to fulfill their crucial missions of providing much-needed support to vulnerable populations.” 

To read the complete article, please visit National Review.  

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