The US tax system is facing an unforeseen problem in the form of an ongoing lawsuit that could potentially disrupt its functioning. The lawsuit, filed by three anonymous taxpayers, takes aim at a series of key elements of the US tax system, all of which are currently in dispute.
The three taxpayers in question are challenging several policies that they view as inequitable, including a provision in the Tax Cuts and Jobs Act of 2017 that eliminated deductions for state and local taxes, as well as the double taxation of certain investments. The suit also challenges the aspect of the law related to pass-through entities, which is the legal name for a type of business in which its owners have their income taxed as personal income rather than corporate income.
The lawsuit claims that these policies constitute a violation of the US Constitution’s due process clauses, as well as the Fourteenth Amendment’s equal protection clause. To support their position, the plaintiffs are using an array of testimonies and evidence to point out what they believe are deficiencies in the US tax system.
Ultimately, this suit could have a huge impact on the US tax system if it is successful. If the lawsuit is successful, it could lead to a complete restructuring of some key aspects of the system, such as eliminating some controversial deductions and changing the way pass-through entities are treated. It could even potentially mean that some taxes would be completely eliminated.
However, this is all speculation at this point as the lawsuit has not even gone to trial yet. The case was filed in December 2020 and is currently before the US Court of Appeals for the Second Circuit. Regardless of the outcome of the case, it is clear that significant changes may be on the horizon for the US tax system should the suit be successful.
In summary, the current lawsuit being faced by the US tax system could have a huge impact on how it functions should it be successful. Although the lawsuit is still pending resolution, it is clear that the implications could be immense. It is now up to the US court system to decide how to handle this case and determine what changes may or may not need to be made to the US tax system.