Charles and Kathleen Moore paid $14,729 in taxes on an investment that never yielded them a penny. They challenge that tax—the Mandatory Repatriation Tax (MRT)— as unconstitutional. As relevant, they argue that a tax on unrealized investment gains is not a tax on “incomes” within the meaning of the Sixteenth Amendment, and it therefore cannot be imposed “without apportionment among the several States.”
The Moores are correct.
Sixteenth Amendment “incomes” include only income realized by the taxpayer. The text and history of the Amendment make clear that it requires a distinction between “income” and the “source” from which that income is “derived.” And, the only way to draw such a distinction is with a realization requirement. Our precedent says as much. In Eisner v. Macomber, 252 U. S. 189 (1920), the Court explained that “the characteristic and distinguishing attribute of income,” as the term is used in the Sixteenth Amendment, is that it is “received or drawn by the recipient (the taxpayer) for his separate use, beneft and disposal.” Id., at 207. Because the Moores never actually received any of their investment gains, those unrealized gains could not be taxed as “income” under the Sixteenth Amendment.
The Ninth Circuit wrongly rejected the Moores' challenge on the ground that “realization of income is not a constitutional requirement.” 36 F. 4th 930, 936 (2022). That conPage Proof Pending Publication clusion cannot be reconciled with the Sixteenth Amendment as the Court correctly interpreted it in Macomber. We therefore granted certiorari to answer the question “[w]hether the Sixteenth Amendment authorizes Congress to tax unrealized sums without apportionment among the states,” i. e., as “incomes.” Pet. for Cert. i.
Today, the Court upholds the MRT only by ignoring the question presented. It does “not address the Government's argument that a gain need not be realized to constitute income under the Constitution.” Ante, at 589, n. 3. Instead, the Court answers the question “whether Congress may attribute an entity's realized and undistributed income to the entity's shareholders or partners, and then tax the shareholders or partners on their portions of that income.” Ante, at 584. After changing the subject, the majority upholds the MRT by relying on unrelated precedent to derive a “clear rule” that “Congress can attribute the undistributed income of an entity to the entity's shareholders or partners.” Ante, at 586–587.
I respectfully dissent. The Ninth Circuit erred by concluding that realization is not a constitutional requirement for income taxes. And, the majority's “attribution” doctrine is an unsupported invention.
I
The Sixteenth Amendment provides: “The Congress shall have power to lay and collect taxes on incomes, from whatever source derived, without apportionment among the several States, and without regard to any census or enumeration.” The central dispute in this case—at least, in the case briefed by the parties—concerns the meaning of the word “incomes” in the Amendment. The Moores defne “income” as “ `a gain, a proft, [or] something of exchangeable value' [that] is `received or drawn by the recipient (the taxpayer) for his separate use, beneft and disposal.' ” Brief for Petitioners 1 (quoting Macomber, 252 U. S., at 207). This idea— Page Proof Pending Publication that “income” is only something actually available for the taxpayer's use—is known as “realization.” The Government rejects the realization requirement, arguing instead that “income” captures “all economic gains” whether or not they are actually realized. Brief for United States 14 (internal quotation marks omitted).
“Income” in the Sixteenth Amendment refers only to income realized by the taxpayer. The Amendment resolved a long-running confict over the scope of the Federal Government's taxing power. It paved the way for a federal income tax by creating a new constitutional distinction between “income” and the “source” from which that income is “derived.” Drawing that distinction necessitates a realization requirement.
A
To understand the text of the Sixteenth Amendment—and, in particular, the meaning of the word “income”—one must frst understand how the Amendment came about. The Constitution's original taxing provisions divided taxes into two classes: direct and indirect taxes. And, as part of a delicate constitutional compromise, the original taxing provisions required direct taxes to be apportioned among the States based on population. Disputes about the scope of the direct-tax category came to a head in Pollock v. Farmers' Loan & Trust Co., 158 U. S. 601 (1895), when this Court held that many income taxes were direct taxes subject to the apportionment requirement. In reaching this conclusion, the Court held that income could not be distinguished from its source for purposes of classifying an income tax as direct or indirect. The Sixteenth Amendment was ratifed to overrule that holding from Pollock, and it can therefore be understood only in the context of Pollock and the preceding history.
The Sixteenth Amendment modifed the Constitution's original regulations of Congress's taxing power. The text Page Proof Pending Publication Page Proof Pending Publication of those provisions is therefore the natural starting point for interpreting the Sixteenth Amendment. The Taxing Clause provides Congress with broad authority to impose taxes.
Other Clauses, including the Direct Tax Clause, classify different kinds of taxes and set corresponding limitations on Congress's power to impose them. The Sixteenth Amendment alters those rules by making clear that taxes on income are not subject to the limitations imposed on direct taxes. The Constitution gives Congress the power to impose “Taxes” of any kind, including income taxes. The Taxing Clause provides that “Congress shall have Power To lay and collect Taxes, Duties, Imposts and Excises, to pay the Debts and provide for the common Defence and general Welfare of the United States; but all Duties, Imposts and Excises shall be uniform throughout the United States.” Art. I, § 8, cl. 1. This Clause is the sole source of Congress's authority to impose taxes. And, that authority is broad. Nothing in the Constitution limits the kinds of taxes that Congress may impose. As the Court has explained, “the authority conferred upon Congress by” the Taxing Clause “is exhaustive and embraces every conceivable power of taxation.” Brushaber v. Union Pacifc R. Co., 240 U. S. 1, 12 (1916).
But, the Constitution restricts the manner in which Congress may impose taxes. It accomplishes this by dividing taxes into two classes—direct and indirect taxes—and imposing a distinct limitation applicable to each of those classes.1 Start with the class of direct taxes. The Direct Tax Clause provides: “No Capitation, or other direct, Tax shall be laid, unless in Proportion to the Census or Enumeration 1The General Welfare Clause—quoted alongside the rest of the Taxing Clause above—is also an important “qualifcation on the substantive taxing power.” Health and Hospital Corporation of Marion Cty. v. Talev ski, 599 U. S. 166, 206 (2023) (Thomas, J., dissenting). But, because this case does not implicate that limitation, I do not further explore the General Welfare Clause.
herein before directed to be taken.” Art. I, § 9, cl. 4. The Constitution does not expressly identify any tax as direct other than a “Capitation.” A “capitation”—also called a “poll tax”—is “[a] fxed tax levied on each person within a jurisdiction.” Black's Law Dictionary 1760 (11th ed. 2019) (defning “tax”). At the founding, the class of direct taxes was also understood to include taxes on real property, and perhaps taxes on personal property. See infra, at 632–634. Indirect taxes, on the other hand, include “Duties, Imposts and Excises.” Art. I, § 8, cl. 1. These were taxes that people could avoid by adjusting their behavior—generally, taxes on articles of consumption. See The Federalist No. 21, p. 116 (E. Scott ed. 1898) (A. Hamilton). “Indirect taxes” are not identifed by that name in the Constitution. But, the Constitution's delineation of a direct-tax category signals the existence of a complementary indirect-tax category.
For each class of taxes, the Constitution limits Congress's power with a distinct rule. Direct taxes are subject to the rule of apportionment. The Constitution twice specifes that “direct Taxes shall be apportioned among the several States . . . according to their respective Numbers.” 2 Art. I, § 2, cl. 3; see also § 9, cl. 4. A tax is apportioned among the States if “each State pays in proportion to its population.” National Federation of Independent Business v. Sebelius, 567 U. S. 519, 570 (2012). An example best demonstrates what apportionment requires. Suppose that Congress imposed a direct tax on houses, and apportioned the tax such that two States of equal population were both responsible for paying $100 in taxes. If the frst State contained 100 houses and the second State only 10, houses in the frst State would be taxed at $1 each ($100 divided by 100 houses), whereas houses in the second State would be taxed at $10 each ($100 divided by 10 houses).
2Those “Numbers” were originally “determined by adding to the whole Number of free Persons . . . three ffths of all other Persons.” Art. I, § 2, cl. 3; but see Amdt. 14, § 2.
Page Proof Pending Publication Indirect taxes are subject to the rule of uniformity: “[A]ll Duties, Imposts and Excises shall be uniform throughout the United States.” Art. I, § 8, cl. 1. The Court has explained that “the words `uniform throughout the United States' . . . signify . . . a geographical uniformity.” Knowlton v. Moore, 178 U. S. 41, 106 (1900). In other words, a “tax is uniform when it operates with the same force and effect in every place where the subject of it is found.” Head Money Cases, 112 U. S. 580, 594 (1884). So, a duty on the importation of tea must impose the same rate on imports coming through Boston as those coming through Savannah.3 The Sixteenth Amendment, on its face, narrows the scope of the apportionment requirement. While direct taxes must be apportioned, the Sixteenth Amendment allows Congress to tax incomes “without apportionment.” But, it did not remove the Direct Tax Clause or the apportionment requirement from the Constitution entirely. To appreciate the extent of the change, and its implications for the meaning of the word “incomes,” it is necessary to examine the origins of the Direct Tax Clause and how disputes about the Clause's scope led to the Sixteenth Amendment.
The Direct Tax Clause was a critical aspect of the balance between state and federal power in the original design of 3For the sake of completeness, three remaining taxing provisions in the Constitution of 1789 bear mentioning. First, “a Tax or duty may be imposed” on the “Importation of such Persons as any of the States now existing shall think proper to admit”—i. e., upon the foreign slave trade—“not exceeding ten dollars for each Person.” Art. I, § 9, cl. 1. Second, “[n]o Tax or Duty shall be laid on Articles exported from any State.” Cl. 5. And third, “[n]o State shall, without the Consent of the Congress, lay any Imposts or Duties on Imports or Exports” (with limited exceptions). § 10, cl. 2. Together, these provisions defne the limits of state and federal taxing power with respect to foreign and interstate commerce. I mention them below only in passing. But, like the division between direct and indirect taxes, these provisions refect the delicate balance that the Constitution struck regarding the scope of the federal taxing power. Page Proof Pending Publication the Constitution. It is easy today to take the federal taxing power for granted. But, at the founding, allowing the National Government to exercise such a power was a radical proposal. The importance of the limitations imposed by the Direct Tax Clause to the compromise struck by the Constitution has signifcant implications for the meaning of “incomes” in the Sixteenth Amendment.
The American colonial experience inspired widespread distrust of taxation. See, e. g., Declaration of Independence ¶19. The Articles of Confederation refected that distrust. Under the Articles, the entire taxing power was exclusive to the States. The National Government had no power to impose taxes of any kind. The only revenue for the National Government was funds “supplied by the several states” pursuant to requisitions “in proportion to the value of all land within each state.” Articles of Confederation, Art. 8. And, the taxes for paying those requisitions were imposed solely by the States themselves.
The requisition system showed immediate signs of inadequacy. Raising funds through requisitions was often ineffective because States felt little urgency to pay their obligations.
See Federalist No. 30, at 160 (A. Hamilton) (explaining that requisitions were formally “obligatory upon the States,” but that “in practice” the right to disregard them was “constantly exercised”). And, the fnancial strain placed on the National Government by the Revolutionary War made that ineffciency an existential threat to the fedgling Nation.
The Continental Congress quickly concluded that fnancing the war effort would require another source of revenue for the National Government. “[T]o establish the national credit,” the Congress's fnance Committee reported in December 1780, “it will be necessary” for the States to “vest[t] in Congress” “[t]he exclusive right to duties arising on certain imported articles.” 18 Journals of the Continental Congress 1774–1789, p. 1157 (G. Hunt ed. 1910). The Congress Page Proof Pending Publication therefore proposed the Impost of 1781, “recommend[ing] to the several states, as indispensably necessary, that they . . . vest a power in Congress, to levy for the use of the United States, a duty of fve per cent.” on most imports. 19 Journals of the Continental Congress 112 (1912) (footnote omitted). The President of the Continental Congress transmitted the proposal to the States on February 8, 1781, under a cover letter stressing the “precarious Manner” in which Congress had to fund the Army under the requisition system. 5 Letters of Members of the Continental Congress 564 (E. Burnett ed. 1931).
Every State but Rhode Island approved the Impost of 1781. See 1 Documentary History of the Ratifcation of the Constitution 63 (M. Jensen ed. 1976) (Documentary History). But, because the Articles of Confederation required amendments like the impost to be approved unanimously, Rhode Island's refusal defeated the amendment. Articles of Confederation, Art. 13; see also 23 Journals of the Continental Congress 783–784 (1914). In a letter to the Confederation Congress,4the Rhode Island Legislature explained that it rejected the impost “[b]ecause it would be unequal in its operation, bearing hardest on the most commercial states,” including Rhode Island. Id., at 788. One State's jealousy of its lucrative tax base prevented the reform of the Articles' fawed requisition system.
A year later, the Confederation Congress again proposed a national taxing power with the Impost of 1783. The proposal languished for years, and then failed after New York refused its consent in February 1787. See 1 Documentary History 190, n. 3. As the second impost awaited its slow death, the Confederation Congress issued a dire warning about the fnancial condition of the National Government in February 1786. See 30 Journals of the Continental Con4After the ratifcation of the Articles of Confederation in March 1781, the Continental Congress became the Confederation Congress. See 1 Documentary History 136.
Page Proof Pending Publication gress 70, 75 (J. Fitzpatrick ed. 1934). Faced with mounting threats to the security of the country, and requisitions that had become “so irregular in their operation” as to be “dangerous to the welfare and peace of the Union,” Congress asserted “that the crisis has arrived” when the people of the United States must decide whether, “for want of a timely exertion in establishing a general revenue,” they will risk both the existence of the Union and the liberty that they won in the Revolution. Id., at 72, 75.
The practical impossibility of reforming the Articles to include a national taxing power was among the primary reasons for the Constitutional Convention of 1787. John Adams later refected as Vice President: “The opposition of Rhode Island to the impost seems to have been the instrument which providence thought ft to use for the great purpose of establishing the present constitution.” 26 Documentary History 743 (J. Kaminski et al. eds. 2013). In February 1787, the Continental Congress endorsed the call for a convention of delegates in Philadelphia. See 32 Journals of the Continental Congress 74 (R. Hill ed. 1936). Virginia had been the frst State to answer that call, and in appointing delegates, made prominent reference to the Confederation Congress's “alarming representations” about the poor state of public fnance. 1 Documentary History 196–198 (discussing Congress's warning of February 1786). The Virginia delegation likewise emphasized the “ineffciency of requisitions” when it opened the proceedings at the Convention. 1 Records of the Federal Convention of 1787, pp. 18–19 (M. Farrand ed. 1911) (Farrand's Records).
The possibility of a federal taxing power was highly controversial at the Constitutional Convention, despite widespread acknowledgment of the need to reform public fnance. The Virginia plan—a broad outline that was selected as the basis for the new Government—did not go so far as to include a federal taxing power. The Virginia delegation apparently considered it less controversial to open the ConvenPage Proof Pending Publication tion with a proposal that gave the Federal Government the ability to enforce requisitions against the States by military force. Id., at 21. The New Jersey plan, by contrast, did include federal taxing powers. Id., at 243. Reason prevailed, and the Convention judged it more prudent to risk a federal taxing power than the extraction of federal revenue by the use of military force against the States. See id., at 54 (“[Madison] observed that the more he refected on the use of force [against delinquent States], the more he doubted the practicability, the justice and the effcacy of it”). The Convention proposed the Constitution with its taxing provisions as described above; they would be ratifed unchanged. See 2 id., at 590, 594, 596; supra, at 623–625.
Unsurprisingly, the proposed creation of a federal taxing power provoked many of the most passionate criticisms by opponents of ratifcation. The Antifederalists warned that a federal taxing power would destroy the state governments. Brutus wrote that the central question presented by ratifcation was “whether the thirteen United States should be reduced to one great republic . . . or whether they should continue thirteen confederated republics.” Brutus No. 1 (Oct. 18, 1787), in 2 The Complete Anti-Federalist 364 (H. Storing ed. 1981). In support of his dramatic thesis, Brutus asserted that “the individual states must very soon be annihilated,” in part by the federal taxing power. Id., at 365. The destructive force of the federal taxing power, as Brutus explained it, arose from the fact that it forced the States to compete with the Federal Government for a tax base.
Because the Constitution prevented the States from emitting paper money and laying duties or imposts, “[t]he only mean therefore left, for any state to support its government and discharge its debts, is by direct taxation.” Id., at 366. But, even the ability to resort to direct taxes would be fruitless, because the power of direct taxation was shared with the Federal Government. Ibid. Brutus thus argued that once the Federal Government “begins to exercise the right of taxPage Proof Pending Publication ation in all its parts, the legislatures of the several states will fnd it impossible to raise monies to support their governments” and then “dwindle away.” Ibid. Other Anti- federalists sounded the same theme at the state ratifying conventions. See, e. g., 3 Debates on the Constitution 29 (J. Elliot ed. 1836) (Elliot's Debates) (George Mason arguing in Virginia that the “two concurrent powers” of the State and Federal Governments to impose taxes directly upon the people “cannot exist long together”).
The Federalists' defense of the new national taxing power stressed that the Federal Government would impose direct taxes only sparingly, as needed to supplement the revenue from imposts in emergencies. Madison explained that “[w]hen . . . direct taxes are not necessary, they will not be recurred to. It can be of little advantage to those in power to raise money in a manner oppressive to the people.” Id., at 95. And, Federalists highlighted the protection provided by the rule of apportionment. Hamilton explained that direct taxes “never can oppress a particular state by an unequal imposition; because the Constitution has provided a fxed ratio, a uniform rule, by which this must be regulated.” 2 id., at 365. Madison argued that because representation and direct taxation were apportioned by the same formula, unjust taxes could not feasibly be imposed; those responsible for paying direct taxes are correspondingly able to defeat their imposition. See 3 id., at 256–257.5 5 Several state ratifying conventions proposed amendments to strengthen the protection provided by the Direct Tax Clause. For example, the Massachusetts ratifying convention proposed that the Constitution be modifed to allow direct taxes only “when the moneys arising from the impost and excise are insuffcient for the public exigencies,” and even then only after Congress frst attempted to obtain such funds through requisitions. 1 Elliot's Debates 322–323. The ratifying conventions of South Carolina, New Hampshire, New York, and Rhode Island concurred in the proposed amendment. Id., at 325, 326, 329, 336. Although those proposals never became part of the Constitution, they demonstrate the importance that many ratifying States placed upon limitations to Congress's power to lay direct taxes.
Page Proof Pending Publication With the Constitution's ratifcation, the requisition system was replaced by a system that gave the Federal Government the taxing power it had lacked under the Articles of Confederation. That increase in power came at the expense of the States. The States gave up the power to tax interstate and foreign commerce, which was expected to be the main source of federal revenue. They did retain the power of direct taxation, but had to share it with the Federal Government—an arrangement that motivated signifcant opposition to the new Constitution. The limitations on the Federal Government's ability to exercise that concurrent power were thus an essential component of the constitutional compromise.
Postratifcation disagreement about what qualifed as a “direct tax” would eventually lead to the adoption of the Sixteenth Amendment. Even though the distinction between direct and indirect taxes was an important component of the founding compromise, it was not entirely clear how to distinguish between the two classes of taxes. The scope of the “direct tax” category proved immediately controversial.
And, that controversy eventually came to bear on the question of income taxation, with the Court initially concluding that the Direct Tax Clause was not a barrier to taxing incomes.
As the Constitution's text made clear, a “Capitation” was “direct.” Art. I, § 9, cl. 3. And, all agreed that taxes on land and slaves were considered direct. See 3 Elliot's Debates 229. But, beyond that, the precise boundary between direct and indirect taxes was debatable. An exchange at the Constitutional Convention preserved in Madison's notes is often cited on the subject: “Mr King asked what was the precise meaning of direct taxation? No one answd.” 2 Farrand's Records 350.
This Court grappled with the question in a signifcant case decided soon after ratifcation. In 1794, the Third Congress passed “An Act laying duties upon Carriages for the conveyPage Proof Pending Publication ance of Persons.” Act of June 5, 1794, ch. 45, 1 Stat. 373. The tax was not apportioned among the States. Some opposed the tax on the theory that a tax on personal property, such as carriages, was a direct tax that required apportionment.6 When Daniel Hylton failed to pay the tax on his 125 carriages, the United States brought a suit against him, and the case soon found its way to the Supreme Court. Hylton v. United States, 3 Dall. 171, 171–172 (1796) (Hylton's Case). “The argument turned entirely upon . . . whether the tax . . . was a direct tax.” Id., at 172. The four Justices who sat for the case each agreed that the tax was constitutional, and the three who offered reasons suggested that “direct” taxes were limited to capitation and land taxes. But, they did so with some caution.
Justice Chase was “inclined to think, but [did] not give a judicial opinion, that the direct taxes contemplated by the Constitution, are only two, to wit, a capitation, or poll tax, simply, without regard to property, profession, or any other circumstance; and a tax on land.” Id., at 175. He “doubt[ed] whether a tax, by a general assessment of per sonal property, . . . is included within the term direct tax.” Ibid. Justice Paterson observed that “[w]hether direct taxes, in the sense of the Constitution, comprehend any other tax than a capitation tax, and tax on land, is a questionable point.” Id., at 177. Justice Iredell opined that “[p]erhaps a direct tax in the sense of the Constitution, can mean nothing but a tax on something inseparably annexed to the soil . . . . A land or poll tax may be considered of this description.” Id., at 183.
6James Madison, for example, despaired about the unconstitutionality of the tax in a letter to Thomas Jefferson. See 15 Papers of James Madison 327 (T. Mason, R. Rutland, & J. Sisson eds. 1985) (“And the tax on carriages succeeded in spite of the Constitution . . . . By breaking down the barriers of the constitution . . . wealth may fnd a precarious defence in the sheild of justice”).
Page Proof Pending Publication Page Proof Pending Publication Additional disputes over what constituted direct taxation arose when the Government resorted to new forms of taxation to fnance the Civil War. In several cases decided shortly after the war, the Court relied on Hylton's Case to conclude that new taxes were indirect. First, the Court reasoned that “[i]f a tax upon carriages, kept for his own use by the owner, [was] not a direct tax,” then “a tax upon the business of an insurance company” was not a direct tax. Pa cifc Ins. Co. v. Soule, 7 Wall. 433, 446 (1869). Next, the Court concluded that a tax on the circulation of bank notes was also indirect, but it surveyed ratifcation-era sources to hint at a slightly more expansive defnition of direct taxes. Veazie Bank v. Fenno, 8 Wall. 533, 544 (1869) (“direct taxes were such as may be levied by capitation, and on lands and appurtenances; or, perhaps, by valuation and assessment of personal property upon general lists”). Finally, the Court concluded that a tax on the devolution of title to real estate was indirect, acknowledging that “it never ha[d] been decided” whether any taxes besides “[t]axes on lands . . . and capitation taxes” were “direct taxes.” Scholey v. Rew, 23 Wall. 331, 347 (1875).
The Civil War also prompted Congress to enact the Nation's frst-ever federal income tax. In 1861, Congress imposed a tax of three percent “upon the annual income of every person residing in the United States, whether such income is derived from any kind of property, or from any profession, . . . or from any other source whatever,” to the extent that income exceeded $800. § 49, 12 Stat. 309. Over the course of the Civil War, the income tax was paid by as many as 1 in 10 Union households and accounted for about a ffth of federal revenues. S. Weisman, The Great Tax Wars 101–102 (2002) (Weisman). The tax remained in force, with modifcations, until it expired in 1871. § 6, 16 Stat. 257. The Court did not consider the constitutionality of the Civil War income tax until a decade after its expiration, in Springer v. United States, 102 U. S. 586 (1881). The “main question” was whether the tax was an unapportioned direct tax that violated the Direct Tax Clause. Id., at 595. The Court held that the income tax was not a direct tax. Relying heavily on Hylton's Case, the Court reasoned “that di rect taxes, within the meaning of the Constitution, are only capitation taxes . . . and taxes on real estate.” 102 U. S., at 602. Accordingly, the income tax at issue was “within the category of an excise or duty.” Ibid.7 In summary, after disputes over the scope of the Direct Tax Clause between the founding and the expiration of the Civil War income tax, the Court apparently concluded that direct taxes were limited to poll taxes and taxes on land. Ibid. But, the Court expressed some doubt as to the proper classification of taxes “levied by . . . valuation and assessment of personal property.” Veazie Bank, 8 Wall., at 544. Based on that narrow reading of the Direct Tax Clause, the Court upheld the Civil War income tax against a constitutional challenge. But, the long-running skirmishes about direct taxation would soon come to a dramatic climax following the imposition of the frst federal income tax in peacetime.
7In the case before us, the Government relies heavily on another case involving the Civil War income tax, Collector v. Hubbard, 12 Wall. 1 (1871). According to the Government, Hubbard “upheld [Congress's] power to” impose “taxes on undistributed corporate earnings” as “income taxes,” a result that subsequent decisions “temporarily undermined” until “the Sixteenth Amendment . . . reinstat[ed]” it. Brief for United States 9. But, Hubbard is of virtually no relevance to the Sixteenth Amendment. Contrary to the Government's assertions, the taxpayer in Hubbard made a statutory argument about the meaning of the word “entitled,” not any argument about the scope of Congress's power. See Brief for Respondent in Collector v. Hubbard, O. T. 1870, No. 122, p. 4. Nor did Hubbard uphold the tax as an income tax. Instead, it interpreted the statute as a tax on a shareholder's property rights in undistributed profts. 12 Wall., at 18. Because the taxpayer did not bring a constitutional challenge based on the Direct Tax Clause, the Court had no occasion to consider the potential implications of treating the tax as a property tax.
Page Proof Pending Publication I next consider the single most important piece of context for understanding the Sixteenth Amendment: Pollock v. Farmers' Loan & Trust Co., 158 U. S. 601, the case that the Amendment overruled. In Pollock, the Court concluded, for the frst time, that a tax was direct, not apportioned, and therefore unconstitutional. The Court's reasoning turned on the premise that the Constitution permits no distinction between taxing income and taxing the source from which that income is derived. The holding of Pollock thus meant that most income taxes would have to be apportioned, a requirement that made them politically unpalatable. See supra, at 624 (describing possible state-by-state variations in rates for apportioned taxes). Because the Sixteenth Amendment overruled the result in Pollock, an accurate understanding of the case is essential to understanding the Amendment.
Congress imposed the Nation's frst peacetime income tax as part of the Revenue Act of 1894. The Act paired a new tax on the incomes of the wealthiest two percent of Americans with tariff cuts that would beneft less wealthy consumers. See Weisman 132–133, 145. The income-tax component of the Act provided: “That [from 1895 until 1900] there shall be assessed, levied, collected, and paid annually upon the gains, profts, and income received in the preceding calendar year by [citizens and resident aliens], whether said gains, profts, or income be derived from any kind of property, rents, interest, dividends, or salaries, or from any profession, trade, employment, or vocation . . . , or from any other source whatever, a tax of two per centum on the amount so derived over and above four thousand dollars.” § 27, 28 Stat. 553.
The income tax was not apportioned among the States by population.
Page Proof Pending Publication In Pollock v. Farmers' Loan & Trust Co., 157 U. S. 429 (1895), the Court considered whether the 1894 income tax was a direct tax that failed to satisfy the Direct Tax Clause's apportionment requirement. The taxpayer argued that portions of the tax were direct because “imposing a tax on the income or rents of real estate, imposes a tax upon the real estate itself.” Id., at 555. And, taking the position that taxes on personal property are also direct taxes, the taxpayer argued that “imposing a tax on the . . . income of bonds or other personal property . . . imposes a tax upon the personal estate itself.” Ibid. The Court endeavored to determine what “were recognized as direct taxes” “at the time the Constitution was framed and adopted.” Id., at 558. The Court considered historical context, the records of the Constitutional Convention, the Federalist Papers, other documents from the ratifcation debates, the 1794 carriage tax, and Hylton's Case. 157 U. S., at 558–568, 570–572. The Court concluded that “all taxes on real estate or personal property or the rents or income thereof were regarded as direct taxes” at the time the Constitution was ratifed. Id., at 573–574. After reaching a conclusion about the original meaning of the Constitution, the Court surveyed its precedents and observed that “in none of them is it determined that taxes on rents or income derived from land are not taxes on land,” and that “none . . . discussed the question whether a tax on the income from personalty is equivalent to a tax on that personalty.” Id., at 579. The Court had some diffculty explaining Springer, which stated that direct taxes are limited to capitation and land taxes and concluded that a tax on income was an indirect tax. See supra, at 633–634. But, the Court returned to “[t]he original record” in Springer to review the sources of the taxpayer's income, and it distinguished the case on that ground. 157 U. S., at 578–579.
In the end, the Court concluded that income could not be distinguished from the source from which it was derived Page Proof Pending Publication Page Proof Pending Publication for purposes of determining whether a tax on that income would be direct or indirect. It was “unable to perceive any ground” “upon which to rest the contention that real estate belongs to one of the two great classes of taxes,” i. e., the direct-tax class, “and the rent or income which is the incident of its ownership belongs to the other,” i. e., the indirect-tax class. Id., at 581. It grounded that conclusion in the fact that the Direct Tax Clause was a federalism provision at the heart of the constitutional compromise: “If, by calling a tax indirect when it is essentially direct, the rule of protection could be frittered away, one of the great landmarks defning the boundary between the Nation and the States of which it is composed, would have disappeared, and with it one of the bulwarks of private rights and private property.” Id., at 583.
The Court held that the Act was unconstitutional in part, “so far as it levies a tax on the rents or income of real estate.” Ibid. But, the Justices divided evenly on the question whether the tax was unconstitutional “as to the income from personal property.” Id., at 586. The case was therefore scheduled for rehearing.
After rehearing, the Court extended its logic and held that a tax on income derived from personal property—like a tax on income derived from real property—was a direct tax.
158 U. S., at 625. The Court offered a more thorough explanation for why income could not be distinguished from its source when classifying a tax. It began by observing that the distinction between direct and indirect taxes was critical to our system of federalism. By ratifying the Constitution, the States “gave up the great sources of revenue derived from commerce” and “retained the power of direct taxation,” but only concurrently with the Federal Government. Id., at 620. Limitations on federal direct taxation offered state governments a fscal safe haven against expanding federal authority, in recognition of the fact “that the power to tax involved the power to destroy.” Id., at 621. “[T]he qualifed grant” of an apportioned direct-taxation power built security into the “structure of the government itself . . . by providing that direct taxation and representation in the lower house of Congress should be adjusted on the same measure.” Id., at 621–622.
The Court relied on those federalism principles to reject the argument “that income is taxable irrespective of the source from whence it is derived.” Id., at 629. It explained that the Constitution—read “in its plain and obvious sense” and in the context of “the circumstances attending the formation of the government”—could not be understood to treat income “as belonging to a totally different class” of taxation than the class “which includes the property from whence the income proceeds.” Id., at 627–628. Such an interpretation would leave the Direct Tax Clause “utterly illusory and futile, and the object of its framers defeated.” Id., at 628. The Court refused to allow the effect of the Direct Tax Clause to be “refned away by forced distinctions between” income and source. Ibid. The Sixteenth Amendment was designed to overrule Pol lock's obstacle to an income tax, and it was understood by the public in those terms. Pollock stood in some tension with the Civil War tax cases, and it was not well received. Critics likened it to Dred Scott v. Sandford, 19 How. 393 (1857), and the decision became a major issue in the 1896 Presidential election. Weisman 148. By the 1908 Presidential election, both major political parties supported fnding a way, Pollock notwithstanding, to impose an income tax.
See E. Seligman, The Income Tax 591–592 (2d ed. 1914).
In 1909, President Taft pledged his support for an income- tax amendment. In a widely published message to Congress, he explained that “[t]he decision of the Supreme Court” in Pollock “deprived the national government of a power which” it “ought to have.” Taft Asks for Tax, Washington Post, June 17, 1909, p. 4. Taft therefore asked ConPage Proof Pending Publication gress to “propose an amendment to the Constitution conferring the power to levy an income tax upon the national government without apportionment.” Ibid. Shortly after the President delivered his message, Senator Norris Brown of Nebraska proposed an income-tax amendment providing: “The Congress shall have power to lay and collect direct taxes on incomes without apportionment among the several States according to population.”
Cong. Rec. 3377 (1909). The proposed amendment's narrow focus on an income tax was signifcant. After all, a constitutional amendment could have easily eliminated Pollock's obstacle to income taxation by removing the Constitution's direct-tax provisions wholesale.8 A few weeks later, the proposed amendment emerged from Committee in its modern form. It is not clear how the original proposal's reference to “direct taxes” was removed, or how the phrase “from whatever source derived” was added. See E. Jensen, The Taxing Power, the Sixteenth Amendment, and the Meaning of “Incomes,” 33 Ariz. St. L. J. 1057, 1116–1117 (2001). The Amendment was passed by Congress on July 12, 1909. See 44 Cong. Rec. 4440. And, the Secretary of State certifed that the Amendment had been ratifed by the States on February 25, 1913. 37 Stat. 1785.
B
With a full understanding of the context against which the Sixteenth Amendment was ratifed, two conclusions become clear. First, because the Amendment abolished Pollock's 8In fact, that possibility was suggested on the Senate foor as soon as the proposed amendment was read. 44 Cong. Rec. 3377 (“[I]f the Senator from Nebraska will change his amendment to the Constitution so as to strike out” all references to direct taxes, “he will accomplish all that his amendment proposes to accomplish and not make a constitutional amendment for the enacting of a single act of legislation”). But, Senator Brown responded that his “purpose [was] to confne it to income taxes alone.” Ibid. Page Proof Pending Publication rule that an income tax must be classifed as direct or indirect based on whether a tax on the source of that income would be direct or indirect, the Amendment created a constitutional distinction between income and its source. Second, because Sixteenth Amendment “income” must be distinguished from its source, the Amendment includes a realization requirement.
I return, fnally, to the text of the Sixteenth Amendment: “The Congress shall have power to lay and collect taxes on incomes, from whatever source derived, without apportionment among the several States, and without regard to any census or enumeration.” Against the background of Pol lock, the “power to lay and collect taxes on incomes, from whatever source derived, without apportionment” under the Sixteenth Amendment has an obvious and narrow meaning.
The only thing the Amendment changed about the Constitution was to abolish Pollock's rule that an income tax is a direct tax if a tax on the source of the income would be a direct tax. The Sixteenth Amendment left everything else in place, including the federalism principles bound up in the division between direct and indirect taxes.
The Court was frst asked to interpret the Sixteenth Amendment in Brushaber v. Union Pacifc R. Co., 240 U. S. 1. A taxpayer raised an exhaustive set of “twenty-one constitutional objections” to the frst income tax under the Sixteenth Amendment. Id., at 10. Recognizing that the text of the Amendment could not be understood in a vacuum, the Court began with the text of the original taxing provisions and the history of the disputes over direct taxes from Hylton's Case to Pollock. 240 U. S., at 12–17. I can little improve on Brushaber's explanation of the Sixteenth Amendment.
“[T]he whole purpose of the Amendment was to relieve all income taxes . . . from apportionment [based on] a consideration of the source whence the income was derived.” Id., at 18. Pollock stood for the rule that “whether a tax on inPage Proof Pending Publication come [is] direct” must be determined based upon a consideration of “the property from which the income [is] derived.” 240 U. S., at 18. It was by “the rule applied in the Pollock Case . . . alone” that income “taxes were removed from the great class of [indirect taxes] and were placed under the . . . direct class.” Id., at 19. The Amendment did nothing more than remove that rule. The result was “the prevention of the resort to the sources from which a taxed income was derived in order to . . . place [an income tax] in the class of direct taxes.” Ibid. But, other than that change, the Amendment “was drawn with the object of maintaining the limitations of the Constitution,” including Pollock's holding that direct taxes included “taxes levied directly on personal property because of its ownership.” 240 U. S., at 19.
The Sixteenth Amendment thus facilitated an income tax by creating a new constitutional distinction between “income” and its “source.” Under the Amendment, “from whatever source” income is “derived,” a tax on it is indirect and therefore not subject to the rule of apportionment.
But, as to taxes on the sources of income, the restrictions imposed by the division between direct and indirect taxes continued to apply with full force. And, taxes on property continued to be classifed as direct taxes.
Because the Sixteenth Amendment requires a way to distinguish between income and source, it includes a realization requirement. The text of the Amendment incorporates such a requirement, and the concept of realization was well understood at the time of ratifcation. The Constitution thus limits unapportioned income taxes to taxes on realized income. The word “income” in the Sixteenth Amendment must be interpreted in light of the Amendment's distinction between income and source. As the Court appreciated in Eisner v. Macomber, failure to understand “income” in this way leads to an interpretation of the Sixteenth Amendment that misPage Proof Pending Publication Page Proof Pending Publication takenly displaces aspects of the original taxing provisions that the Amendment left in place: “In order, therefore, that the clauses cited from Article I of the Constitution may have proper force and effect, save only as modifed by the Amendment, and that the latter also may have proper effect, it becomes essential to distinguish between what is and what is not `income.' ” 252 U. S., at 206.
Without an understanding of “income” that distinguishes it from “source,” the Sixteenth Amendment undermines the restriction imposed by the Direct Tax Clause. The Government asserts that the Sixteenth Amendment uses “ `income' . . . to refer to all economic gains.” Brief for United States 14 (some internal quotation marks omitted). That understanding of “income” would allow taxes on real and personal property without apportionment. To be sure, most of the Government's arguments focus on “taxes on individuals' pro rata shares of undistributed corporate earnings.” Id., at 13. But, the Government is not shy about the fact that its defnition of income includes things such as “increase in the value of a corporation's capital assets,” “increase in the value of unsold property,” and “appreciation in the value of securities.” Id., at 16 (alterations and internal quotation marks omitted). Those increases are “income” in a purely economic sense, but not in a sense that meaningfully distinguishes between “income” and the “source” from which it is “derived.” A tax on each, whether it be an increase in assets, unsold property, or securities, would be a tax on the value of real estate or property, and should therefore require apportionment under the Direct Tax Clause.
The text of the Sixteenth Amendment points to the concept of realization, as the Court explained that concept in Macomber. The Amendment is clear that the word “income” refers to something that is “derived.” Dictionaries at the time of ratifcation defned “derive” as “[t]o receive, as from a source or origin” and “to draw.” Webster's New International Dictionary 601 (1913) (Webster's). And, that sense of “derived” maps neatly onto Macomber's realization- focused defnition of “income” as being “received or drawn by the recipient (the taxpayer) for his separate use.” 252 U. S., at 207.
In fact, the idea of realization as the distinction between income and source long predates both Macomber and the Sixteenth Amendment. As the Government acknowledges, “the concept” of “realization . . . was well established when the Amendment was adopted.” Brief for United States 15.
The term “realized” appeared in several Civil War income tax provisions. Id., at 16 (citing § 116, 13 Stat. 281; § 7, 16 Stat. 257–258). And, contemporaneous “[d]ictionaries defned `realize' as `to convert any kind of property into money.' ” Brief for United States 15–16 (quoting Webster's 1778, and citing Black's Law Dictionary 993 (2d ed. 1910); alteration omitted). The Government argues that the decision to omit the often-used word “realized” from the Sixteenth Amendment is signifcant evidence that the Amendment does not require realization. See Brief for United States 16. But, the choice to instead use the near-synonym “derived” merely refects the repeated use of the word “derive” to describe the relationship of income to its source in Pollock, to which the Sixteenth Amendment was a direct response. See 158 U. S., at 618, 629, 635.
The metaphor that the Court famously used in Macomber also shows the deep roots of the realization concept. To illustrate the “fundamental relation of `capital' to `income,' ” Macomber compared “the former . . . to the tree or the land, [and] the latter to the fruit or crop.” 252 U. S., at 206. That understanding of income as being something “severed from” its source predated the Sixteenth Amendment. In a well- cited case from 1878, the Georgia Supreme Court relied on a tree-and-fruit analogy in a tax case to explain the difference between income and property: “The fact is, property is a tree; income is the fruit.” Waring v. Mayor and Aldermen of Savannah, 60 Ga. 93, 100 (1878); see also Black's Law DicPage Proof Pending Publication tionary, at 612 (defning “income” (citing Waring, 60 Ga., at 99)).
The text of the Sixteenth Amendment, read against the background of its adoption, confrms that the “incomes” that the Sixteenth Amendment allows Congress to tax without apportionment are only realized incomes. We granted certiorari in this case to answer whether Congress may “tax unrealized sums without apportionment among the states.” Pet. for Cert. i. As the Sixteenth Amendment makes clear, the answer to that question is a resounding “no.” The Court errs today by failing to correct the Ninth Circuit's contrary understanding.
* * * It is imperative to give the original taxing provisions in Article I their proper effect. Those provisions refect a delicate compromise under which the founding generation took the great risk of ceding much of the States' exclusive taxing authority to the Federal Government. Supra, at 625– 631. Without that compromise, the Constitution could easily have been rejected. To be sure, the States slightly altered the original agreement by ratifying the Sixteenth Amendment. But, a constitutional amendment does not affect our duty of fdelity to the aspects of the original agreement that remain in place—including the Direct Tax Clause. If a written constitution is to mean anything, the compromises it records must bind us until we amend them.
II
The Court strains to uphold the Mandatory Repatriation Tax without addressing whether the Sixteenth Amendment includes a realization requirement, the question we agreed to answer in this case. The majority starts by surveying a scattered sampling of precedents—mostly about tax avoidance—to invent an “attribution” doctrine that sustains the MRT. The majority also relies on “longstanding congressional practice” to conclude that the Moores' claim fails bePage Proof Pending Publication cause they cannot distinguish the MRT from similar taxes imposed by Congress in the past, which the Moores concede are constitutional. Neither point can withstand scrutiny.
A
To avoid the question whether the Sixteenth Amendment requires realization, the majority reframes the case as being about whether Congress may attribute an entity's realized income to shareholders or partners. Ante, at 584. According to the majority, our precedents establish a “clear rule” that the Sixteenth Amendment empowers Congress to choose whether “to tax [an] entity on its income” or instead “tax the entity's shareholders or partners on their share of the entity's undistributed income.” Ante, at 593. Applying this rule, the Court concludes that the MRT permissibly chooses to attribute undistributed income earned by foreign corporations to their American shareholders. The Court thus refuses to address the “Government's argument that a gain need not be realized to constitute income under the Constitution” because the foreign corporation has realized the income. Ante, at 589, n. 3.
The majority's Sixteenth Amendment “attribution” doctrine is a new invention. The majority justifes its creation by plucking superfcially supportive phrases from an eclectic selection of tax cases. But, none of the cases supports the proposition that the Sixteenth Amendment empowers Congress to freely attribute income to any taxpayer it reasonably chooses.
The majority begins with Burk-Waggoner Oil Assn. v. Hopkins, 269 U. S. 110 (1925), a case that it says “articulated [the] fundamental principle” that “Congress could tax . . . income as it ch[ooses],” either by taxing an entity or an individual. Ante, at 585. But, Burk-Waggoner merely held that Congress may tax a de facto corporation on its own income, even if it is formally a partnership under state law. See 269 U. S., at 114 (“[N]othing in the Constitution precludes Page Proof Pending Publication Congress from taxing as a corporation an association which, although unincorporated, transacts its business as if it were incorporated”).
Tellingly, we have never cited Burk- Waggoner for the proposition derived by the majority, but instead for the proposition that federal statutes “designed to tax income actually earned . . . are not to be frustrated by state laws.” Commissioner v. Tower, 327 U. S. 280, 288 (1946) (citing 269 U. S., at 114); see also Lyeth v. Hoey, 305 U. S. 188, 194 (1938) (same); Hemphill v. Orloff, 277 U. S. 537, 550 (1928) (same). Burk-Waggoner thus shows that state law may not be used as a means of evading federal taxes— not that Congress may choose whether to attribute income to entities or individuals.
The majority then cites Burnet v. Leininger, 285 U. S. 136 (1932), which it says “reiterated” that Congress can choose to impose income-tax liability “ `upon [a] partnership directly' ” or “ `upon the individuals carrying on business in partnership.' ” Ante, at 585–586 (quoting 285 U. S., at 142). But, the majority quotes language that is part of a due process holding, not an application of the Sixteenth Amendment. Leininger involved a taxpayer's attempt to evade taxation by assigning half of his share in a partnership's income to his wife. Id., at 138. The taxpayer argued that assessing income taxes against him based on “a partnership interest owned by his wife” violated the Fifth Amendment's Due Process Clause. Brief for Respondent in Burnet v. Lei ninger, O. T. 1931, No. 426, p. 24. The Court rejected the argument, concluding that it did not violate due process to “tax the distributive share of each partner” by ignoring the taxpayer's attempt to divert his income to his wife. 285 U. S., at 142. The majority is clear that it offers no opinion about due process questions. See ante, at 581, nn. 4, 6. Because Leininger is a due process case, it is unclear how it supports the majority's Sixteenth Amendment attribution doctrine.
Page Proof Pending Publication Next, the majority claims that the Court “reaffrmed that Congress may choose to tax either [a] partnership or [its] partners” in Heiner v. Mellon, 304 U. S. 271 (1938), when it rejected the argument by members of a partnership “that Congress could not tax them on income that they did not and could not personally receive.” Ante, at 586. But, Heiner is a statutory interpretation case. Under the applicable statute, the taxpayers were subject to a tax on their “distributive share, whether distributed or not, of the net income of the partnership.” § 218(a), 40 Stat. 1070. The taxpayers argued only that “there was no distributive share” within the meaning of the statute, because distribution was currently impossible under state law; they made no argument about the scope of Congress's power. Brief for Respondents in Heiner v. Mellon, O. T. 1937, No. 144 etc., p. 34. Heiner's interpretation of the statutory phrase “distributive share” cannot be understood as a holding about the scope of Congress's supposed attribution power.
The majority completes its survey of “attribution” precedents with Helvering v. National Grocery Co., 304 U. S. 282 (1938), which it says extended Heiner's attribution principle from partnerships to corporations. Ante, at 586. But, Na tional Grocery demonstrates Congress's ability to legislate against tax-avoidance schemes—not an ability to freely attribute corporate income to shareholders. The majority misleadingly describes National Grocery as involving “the controlling shareholder of a corporation” being taxed “individually . . . on the year's profts.” Ante, at 586 (internal quotation marks omitted). In reality, the case involved a tax paid by a corporation—owned 100% by one person—after the corporation permitted profts to accumulate without distribution “ `for the purpose of preventing the imposition of [a] surtax upon [the] sole stockholder.' ” 304 U. S., at 285. In essence, the sole stockholder used the corporation as a tax-free bank account to hold what was really his income. Page Proof Pending Publication The Court concluded that Congress may legislate to prevent “the sole owner of [a] business” from “conducting it as a corporation” to avoid the tax consequences that would attach if the business had “been carried on as a partnership.” Id., at 288. The Court cited Heiner merely to explain those tax consequences, not to support an attribution principle. Na tional Grocery is yet another tax-evasion case, not an application of an attribution principle.
At most, the cases cited by the majority demonstrate that Congress may attribute income to the entity or individual who actually controlled it when necessary to defeat attempts to evade tax liability. They do not suggest that Congress may freely choose whether to impose an income tax on a corporation or on its shareholders. The “clear rule” that the majority relies on to sidestep the realization question is thus a mirage. Ante, at 593.
B
The majority separately concludes that the Moores' claim fails because they cannot distinguish the MRT from other longstanding taxes that they concede are constitutional. The majority sees no distinction between the MRT and older taxes on partnerships, “S corporations,” and closely held foreign corporations under other parts of subpart F. Ante, at 592–597. But, the majority's insistence that the MRT is just like other forms of pass-through taxation is not convincing. First, the MRT's taxation of corporate shareholders is not like pass-through taxation of partners. The Moores are correct that the Sixteenth Amendment allows Congress to tax partners on partnership income because “partnerships hav[e] no existence separate from their partners.” Brief for Petitioners 51. A partner's share of partnership income is therefore understood to be his own income. The majority quibbles with the Moores' understanding of early-20th century partnership law and points out that “legislatures treated partnerships as separate entities in many contexts,” Page Proof Pending Publication including for some tax purposes. Ante, at 593–594. But, the fact that a partnership can sometimes be treated as an entity is beside the point. The signifcant fact is that partners had long been considered to be subject to income taxes without consideration of the partnership; longstanding taxes based on that understanding are not implicated by the Moores' challenge to the MRT.
Second, and for similar reasons, the MRT's taxation of corporate shareholders is not like pass-through taxation of shareholders of “S corporations.” An S corporation is a corporation that does not have more than 100 shareholders, does not have any shareholder who is not an individual or who is a nonresident alien, does not have more than one class of stock, and which elects to be treated as an S corporation. 26 U. S. C. §§ 1361(a)(1), (b)(1). These eligibility requirements make it clear that pass-through taxation of S corporations is merely an extension of the pass-through taxation of partnerships. Indeed, for most tax purposes, S corporations are equivalent to partnerships, not to corporations. “Tax practitioners often say that an S corporation is taxed like a partnership.” CCH S Corp. Guide ¶510, p. 505 (2013); see also West's Tax Law Dictionary (2024) (defning “S Corporation” as “Corporation which elects S status and receives tax treatment similar to a partnership”).
Taxing S corporation shareholders on corporate income is constitutional for the same reasons as taxing partners on partnership income. To the majority, “S corporations are another example of Congress's authority to either tax the corporation itself on corporate income or attribute the undistributed income to the shareholders and tax the shareholders.” Ante, at 595. But, it does not make sense to look to S corporations for conclusions about the pass-through taxation of corporate shareholders generally.
Finally, the MRT is unlike other taxes on shareholders of closely held foreign corporations. The MRT “differs from Page Proof Pending Publication other provisions of Subpart F”—the portion of the Internal Revenue Code dealing with controlled foreign corpora- tions—because the MRT does not focus on “the corporation's receipt of investment earnings while subject to the shareholders' control.” Brief for Petitioners 44–45. Subpart F “aligns the corporation's earning of the money being taxed with the shareholder's control in the same year.” Reply Brief 23. But, “[t]he MRT by its terms takes no account of whether a shareholder had any interest or control when the corporation made the earnings that it attributes to her.” Ibid. In fact, the MRT “tags a shareholder with taxable `income' even if” he purchased shares “long after the corporation earned the sums being taxed,” and it imposes no liability on taxpayers who owned shares for years of retained earnings but sold them before the MRT's trigger date.
Brief for Petitioners 45. Subpart F includes some minimal requirements to ensure that taxable “income” belongs to the shareholder in some way; the MRT abandons that effort entirely.
The majority concludes that “the MRT . . . has the same essential features as subpart F.” Ante, at 596. But, unlike the rest of subpart F, the MRT has no connection at all to any “recognition event” or “constructive receipt of income,” and it offers no “rational basis for Congress to attribute in come to a taxpayer.” S. McElroy, The Mandatory Repatriation Tax Is Unconstitutional, 36 Yale J. Reg. Bull. 69, 80–81 (2018). The MRT turns solely on the ownership of stock on a certain date. That is a signifcant difference between the MRT and the rest of subpart F, and one with constitutional implications.
The fact that the MRT has novel features does not mean that it is unconstitutional. But, the MRT is undeniably novel when compared to older income taxes, and many of those differences are constitutionally relevant. Because the MRT is imposed merely based on ownership of shares in a corporation, it does not operate as a tax on income.
Page Proof Pending Publication
C
The majority is not ashamed to lay bare the consequentialist heart of its opinion. Because it wrongly concludes that the Moores' constitutional argument would invalidate not only the MRT but also other longstanding taxes, the majority frets that the Moores would “deprive the U. S. Government and the American people of trillions in lost tax revenue” and “require Congress to either drastically cut critical national programs or signifcantly increase [other] taxes.” Ante, at 597. “The Constitution does not require that fscal calamity,” the majority proclaims. Ibid. I agree. But, if Congress invites calamity by building the tax base on constitutional quicksand, “[t]he judicial Power” afforded to this Court does not include the power to fashion an emergency escape. Art. III, § 1, cl. 1.
Even as the majority admits to reasoning from fscal consequences, it apparently believes that a generous application of dicta will guard against unconstitutional taxes in the future. The majority's analysis begins with a list of non-existent taxes that the Court does not today bless, including a wealth tax. Ante, at 584–585, n. 2. And, it concludes by offering a narrow interpretation of its own holding, hinting at limiting doctrines, prejudging future taxes, cataloguing the Government's concessions, and reserving other questions “for another day.” Ante, at 598–600. Sensing that upholding the MRT cedes additional ground to Congress, the majority arms itself with dicta to tell Congress “no” in the future. But, if the Court is not willing to uphold limitations on the taxing power in expensive cases, cheap dicta will make no difference.
III
The Court today upholds the MRT, but not because it endorses the Ninth Circuit's erroneous view that “realization of income is not a constitutional requirement.” 36 F. 4th, at 936. The majority acknowledges that the Sixteenth AmendPage Proof Pending Publication ment draws a distinction between income and its source.
Ante, at 583. And, it does not dispute that realization is what distinguishes income from property. Ante, at 584.
Those premises are suffcient to establish that realization is a constitutional requirement. Sixteenth Amendment “income” is only realized income. We should not have hesitated to say so in this case. I respectfully dissent.
Page Proof Pending Publication Page Proof Pending Publication Reporter’s Note The attached opinion has been revised to refect the usual publication and citation style of the United States Reports. The revised pagination makes available the offcial United States Reports citation in advance of publication. The syllabus has been prepared by the Reporter of Decisions for the convenience of the reader and constitutes no part of the opinion of the Court. A list of counsel who argued or fled briefs in this case, and who were members of the bar of this Court at the time this case was argued, has been inserted following the syllabus. Other revisions may include adjustments to formatting, captions, citation form, and any errant punctuation. The following additional edits were made: p. 609, line 17: “the” is inserted before “liquid” p. 610, line 3 from bottom: “realized” is inserted before “taxable” p. 636, line 10: “on” is replaced with “upon”