Inside the Supreme Court battle that could rewrite the US tax code: Case over couple’s $15K IRS bill threatens to jeopardize Biden’s billionaires’ tax plan – as former GOP speaker Paul Ryan slams ‘unconstitutional’ case

A Supreme Court battle over a Washington couple's $15,000 IRS bill threatens to rewrite America's tax code.

Oral arguments began today in the case of Moore V. United States over a 2017 Trump-era tax rule. The measure affects few Americans, but overturning it could redefine the way income is taxed in the US , could cost the federal government hundreds of billions of dollars and jeopardize Biden's tax bill for billionaires.

Former Republican Speaker of the House of Representatives Paul Ryan said today that the challenge was “misguided” and could render much of the tax code “unconstitutional.”

The case centers on Charles and Kathleen Moore of Redmond, Washington, who sought reimbursement of a $14,729 bill paid on their shares in an Indian company.

The bill was prompted by a change in the way foreign profits of American companies were taxed under Trump.

It imposed a one-time levy on U.S. companies' previously untaxed profits from foreign subsidiaries. Individuals who owned more than 10 percent of shares in foreign companies were also affected by the change.

The rule was expected to generate $340 billion in revenue over 10 years.

In the Moores' case, they had invested $40,000 in KisanKraft – an Indian tool and equipment company – which gave them a 13 percent stake in the common stock.

But the couple claims their profits were never 'realized' because the money was reinvested. They claim that they cannot be taxed on unrealized profits.

They are supported by conservative political groups and business interests, including the U.S. Chamber of Commerce.

Those associated with the Moores argue that a change in the law would be akin to a wealth tax, which would apply not to the incomes of the wealthiest Americans, but to their assets, such as stock ownership. Currently these are only taxed when they are sold.

Lower courts have ruled that income must be realized to be taxable – as suggested in the 16th Amendment, which gives Congress the power to impose income taxes.

But Ryan, who was chairman when the tax law was signed into Congress, said, “A lot of the tax law would be unconstitutional if that thing were to prevail.”

Democrats are also concerned that this could hinder legislation like the billionaires' income tax, which was introduced last week.

The bill will tax those with more than $1 billion in assets – or $100 million in income for three consecutive years – at a rate of 20 percent. It will apply to both their full income and their unrealized appreciation.

Democratic Senator Ron Wyden of Oregon, who is leading the legislation, said:The Moore case could make it impossible to close these loopholes.”

The battle has also raised ethical concerns and questions about the story the Moores' lawyers told in court filings.

Public documents show that Charles Moore's involvement with the company, including five years as director, is much more extensive than court records indicate.

Senate Democrats had asked Judge Samuel Alito to step aside from the case over his interactions with David Rivkin, a lawyer representing the Moores.

Democrats said Alito had cast doubt on his ability to judge the case fairly because he conducted four hours of interviews on the Wall Street Journal op-ed page with an editor at the paper and Rivkin.

Alito has rejected the claims a four-page statement issued by the court saying there is 'no valid reason' for his refusal.