The Latest News - Supreme Court Has Major Cases On Its Docket
Hello McFinancers! This week, we wanted to talk about some new cases that have appeared on the US Supreme Court docket and look at the impact that they could have on investors.
The latest in financial news: The US Supreme Court has a case on its docket about what income is taxed under current laws, there is less demand for US treasuries, and then there is a case against the SEC.
Supreme Court Case About Your Income
As the saying goes, the only guarantees in life are death and taxes. Well, that may change soon as the Supreme Court currently has on its docket a case that could change how investors are taxed. The case, Moore vs. United States (docket number 22-800), is about the authority of Congress to tax unrealized sums on unrealized income. As many seasoned investors know, you don’t pay taxes on any stock gains from capital appreciation unless you sell. Or how real estate investors can limit their capital gains taxes by selling an old house to buy a new house using the 1031-like-kind exchange (called for because it comes from the Internal Revenue Code Section 1031). The case argues whether the 16th Amendment and Congress’ ability to collect capital gains taxes.
This is an interesting case. This case can have major economic effects on investors in the US. As many Americans now, Supreme Court judges are appointed for life once they are confirmed. Since the president is the one who determines who will become a new justice when a seat becomes vacant, this allows some presidents to allow their idealogy to continue as they can appoint judges with similar beliefs. Over time, this has caused the court to sway from being more liberal to more conservative and vice versa. With former President Trump appointing three of the nine Supreme Court judges. This can have a major effect on this ruling as most of these judges lean more conservative.
Treasury Bond Sales Are Down
The demand for US treasuries has fallen over the past few years. The amount of interest in a US treasury from central banks and other governments has decreased. China and Japan have about 7% of government bonds but about a decade ago they had about 22% of government bonds. Central banks have been moving away from US treasuries towards gold. This can be correlated to the rapid increase in interest rates as it caused massive losses for banks.
The movement away from reliance on the US dollar started around the start of the Ukraine war. After the US froze many Russian leader’s accounts and moved to remove them from SWIFT, the rest of the world has slowly been moving away from the US dollar. There has been a lot of abuse by the US government of the US dollar to use as a weapon or influence factor that it can be argued that countries want to limit their exposure to a potential threat to their economies.
The Case To Destroy The SEC
Most if not all investors have heard of the SEC (Securities and Exchange Commission). The SEC has had a hand in almost every investment type since its creation. While it has done some good in keeping investors on a level field and preventing abuse, they aren’t always perfect. The Supreme Court has a new case, SEC vs. Jarkesy (docket number 22-859), that is looking at how the SEC enforces the laws and if they were violating the 7th Amendment. (The 7th Amendment states that you have the right to a trial by a jury.) The biggest part of this case that investors should know is that this argument is about the “nondelegation doctrine“ which limits how much power Congress can give governmental agencies.
Is this the end of the US government? No, but it could have some major impacts. If the Supreme Court rules about the SEC not having the proper then it could cause how US law enforcement agencies operate. We don’t believe that it will go that far, but we do feel that this case may eventually cause changes in how these law enforcement agencies operate. Whether that requires new laws from Congress about it or rewriting existing laws.
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* Investing can be unpredictable and volatile. Investors should always do proper due diligence to determine if assets are right for them. We are not licensed tax or financial professionals.
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