This week on The Learning Curve, guest co-hosts Prof. Albert Cheng of the University of Arkansas and Alisha Searcy interview journalist Emily Hanford, host of the hit podcast Sold a Story: How Teaching Kids to Read Went So Wrong. Ms. Hanford discusses how she became interested in the science of reading, the growing consensus around phonics as the best way to teach children to read, the impact of the digital age on learning, and the importance of academic background knowledge for schoolchildren’s learning. She offers her thoughts on how to reverse dramatic declines in NAEP reading test scores and the different kinds of reading that young people should be doing, including fables, poems, myths, fiction, history, and biography, that give them the wider vocabulary and knowledge to be good readers.
Stories of the Week: Albert discussed a story from Axios about U.S. students’ math scores plunging in the PISA global education assessment; Alisha commented on a story in USA Today about how, despite the ongoing growth of private, charter, and homeschooling during the COVID-19 pandemic, most U.S. students continue to attend a traditional district public school.
Guest:
Emily Hanford is host of the hit podcast Sold a Story: How Teaching Kids to Read Went So Wrong, the second-most-shared show on Apple Podcasts in 2023 and one of Time Magazine’s top three podcasts of the year. Sold a Story has garnered some of the highest honors in journalism, including the Murrow, the IRE, two Scripps Howard awards, a Third Coast Impact award, and a Peabody nomination. Hanford has been covering education for American Public Media since 2008 and working in public media for 30 years. She has won numerous awards for her work, including the EWA Public Service Award in 2019 for Hard Words and an award from the American Educational Research Association for Excellence in Reporting on education research. She is based in the Washington, D.C. area and is a graduate of Amherst College.
"Driving across tracts of new-home development in El Paso, Texas, one can’t miss the signs of charter-school momentum." https://t.co/GaqTfVH18h
— Education Next (@EducationNext) December 11, 2023
Click here to read a transcript
Transcript: SCOTUS Wealth Tax: Are Appreciated Assets Income?
Hubwonk Episode 181 December 12, 2023
This is Hubwonk. I’m Joe Selvaggi. Welcome to Hubwonk, a podcast of Pioneer Institute, a think tank in Boston. For most of the history of the United States, a federal income tax was deemed unconstitutional. But the ratification of the 16th Amendment in 1913 erased that constraint with a single sentence: “The Congress shall have the 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.” Since 1913, taxable income has been understood to be money that is either earned through a paycheck or from profit earned from the sale of an asset. But the U.S. government is challenging that interpretation of income, taking its case, Moore v. U.S.A., to the Supreme Court. In oral arguments heard last week, the U.S. Solicitor General asserted that taxable income may also be levied on the increase on the value of an asset, regardless of whether the owner realizes any of the income from that asset. While the details of this case involve unusual tax provisions on American ownership in foreign companies, the principle at stake is whether income must be realized in order to be taxable. Such a shift in definition could redefine all appreciation assets as taxable income, inviting investors to face a tax bill long before a single cent of income is ever received. Could an adverse decision in the Moore v. U.S.A. case usher in a new regime of taxing appreciated investment, including assets such as a house, in the same way as realized income? My guest today is Tommy Berry, editor-in-chief of the Cato Institute Supreme Court Review, who co-authored an amicus brief in the recently argued Moore v. U.S.A. case. Barry has examined the legal precedence and constitutional history of the U.S. federal income tax and has written extensively on the constraints the Constitution imposes on congressional prerogatives. Attorney Barry will share with us his views on the facts in the Moore v. U.S.A. case, the insight the oral arguments offer on the nine justices’ view on tax law, and the possible effects on American investors if the highest court redefines asset appreciation as income. When I return, I’ll be joined by constitutional scholar, Attorney Tommy Berry.
Okay, we’re back. This is Hubwonk. I’m Joe Selvaggi. I’m now pleased to be joined by Hubwonk listener favorite and editor-in-chief of the Cato Institute Supreme Court Review, Attorney Tommy Berry. Welcome back to Hubwonk, Tommy.
Tommy Barry: Thanks for having me.
Joe: All right. Before we, I’m going to surprise you with this remark — before we dive into our topic today, which is going to be about taxes and the Supreme Court’s ruling about taxes I want to congratulate you on your recent induction into the esteem ranks of the lawyers of the Supreme Court I’m not sure what the title is, but before we get started share with our listeners what happened and how you were fortunate enough to be among the elite attorneys who can stand there before the Supreme Court.
Tommy: Oh well, you’re overselling it a bit, but I appreciate it. Thank you. It requires the arduous task of having been a lawyer for three years, having $200 and having two current members of the Supreme Court bar who are willing to vouch for my character. So that was and filling out many, many forms. And then when you do all that, you get an invitation to come to the Supreme Court and be sworn in in person, which I wanted to do. I was eligible during COVID, but you know, getting sworn in just through me. a piece of paper isn’t as exciting. So, I held out for when they started doing it in person again. And just so happened to luck out that the data I was assigned was a pretty big oral argument, a case called Rahimi about the Second Amendment. And what’s really cool is on the day you get sworn in, you get absolute front row seats. I was literally sitting two feet behind council table at the front of the Supreme Court, and my boss and mentor Clark Neily at Cato Institute gets to go up to the lectern and personally ask the Chief Justice to admit me to the court, and the Chief Justice makes eye contact with me and says, “Mr. Barry, your motion is admitted.” So, I definitely recommend it, and even if you’re never going to argue at the Supreme Court, which I certainly won’t, I don’t think — it’s an experience worth doing.
Joe: Wonderful. Yes, we’ve had our Clark Neily on the show to talk about Rahimi, so great. You’ve got an exciting front row seat to a very exciting case that we’ve talked about on the podcast as well. So, we’re going to be talking about a different case today, one called Moore v. U.S.A. which recently or earlier this week we heard oral arguments. Familiar phase again from Rahimi there was the solicitor general Elizabeth Prelogar, who’s becoming quickly infamous in her skill as arguing on behalf of the U.S. But anyway, we want to talk about the facts. Let’s start just basically at a very high level just to pique our listeners’ interests. What were the basic contours of the case? You’ve been part of an amicus brief for this case. What were the facts in this case at a very high level?
Tommy: Sure. So, this goes back to a political compromise in 2017, shortly after President Trump took office, you know, one of his first big legislative accomplishments was the Tax Cuts and Jobs Act. It cut taxes in a lot of areas. It reshaped the way that foreign taxes on foreign corporations that U.S. shareholders may own part of — it kind of changed the way that system worked. There was concern mostly on the Democratic side of the aisle that it might cause too much of a short haul in tax revenue, especially in the U.S., especially in the United States. the short term. So as a compromise, they invented a one-time only very unusual tax that they called the mandatory repatriation tax (MRT). And it kind of invented a legal fiction that said for one time only for 2017 tax year and only 2017 tax year, we’re going to tax certain shareholders who own at least 10% of foreign corporations as if they had been receiving dividends for the whole length of time that they’ve owned these corporations going back years or even decades. So, it sort of looks at what was the earnings of that corporation during whatever time that they held that shares in that corporation and treated it as if they had made a profit off of it, even if in fact they had not, which is why I call it a legal fiction. And unusually, it didn’t look at just one year, it went back for however long that they held ownership stake.
Joe: Okay, so we’ve got some facts in the case. We have a couple. I’ll just introduce some sort of more specifics. I think they invested about $40,000 in a firm that’s in India. I think they co-invested with a friend. They own about 13%, which clears that 10% or more share. As you mentioned, it’s a 2017 Tax Cuts and Jobs Act, and they sort of got swept up in this so-called mandatory repatriation tax, but they had never actually received the penny from this company. They just essentially, notionally, their value in the firm had increased. I don’t have that number in front of me. But effectively, this is a tax, in this case, on the notional increase in their value of their assets, not actual income that they’ve received. So, we’re going be talking a lot about income, what that means, about how it is that the government is able to tax us, the federal government is able to tax us. So, let’s get a little history lesson here before again, we dive into the facts more deeply in this case. How is it that the U.S., the federal government can tax our income? Again, I think our listeners might be surprised to learn that for the vast majority of our country’s history, we didn’t have a federal income tax. Where does that come from? And how is that constitutional?
Tommy: That’s right. So, during the Constitutional Convention, there were many compromises as a anyone with some knowledge of that history knows many of the compromises were about big states versus small states. One of the fights was about, you know, the Congress, the House and Senate — should one represent larger states more? The smaller states didn’t really like that there was a U.S. House where the big states would have more representation. So, they got a concession that kind of what the Framers thought was a clever, a clever sort of two sides of the coin compromise, which was that not only would larger states have more members of the House of Representatives, they would also have to pay more in so-called direct taxes. Now they didn’t define what that term was, but essentially they said whatever a direct tax is, that that would be apportioned among the states based on population, the same population formula that’s used to allocate representatives. So, if at the time Virginia was three times as populous as Rhode Island, you would have to take three times as many direct taxes from Virginia as Rhode Island. Now what might immediately become apparent there is that that makes no reference to the incomes of the various states, and not every state has the same level average level of income. Some states have much higher per capita income than others do. So, it quickly became apparent that if an income tax is a direct tax, it wasn’t going to be feasible to impose an income tax on the basis of income across the states. So, to use a modern-day example, I think Massachusetts has the highest per capita income. I think Mississippi might have the lowest, but if they have roughly equal populations, you would have to, under this original rule, take the same amount roughly based on their populations from those two states with no regard to the fact that people are making way more money in Massachusetts. So, the federal government tried to impose an income tax. They argued that it’s not a direct tax, but the Supreme Court in a case called Pollock in the early 20th century said, “No, this is a direct tax. You do have to apportion it, and therefore we’re striking it down.”
And at that point, it became apparent that the only way to impose an income tax would be to pass a constitutional amendment that exempts income taxes from this apportionment requirement. The apportionment requirement effectively made it infeasible to impose a federal income tax. And that’s exactly what happened. The 16th Amendment, as a direct response to Pollock, was proposed, was enacted and ratified, and it exempts income taxes from the apportionment requirement. And ever since then, we’ve had a federal income tax for that reason.
Joe: Okay, so I think I’m keeping up. We wouldn’t want Mississippi and Massachusetts to pay the same tax per capita because, presumably, we’d be severely regressive, meaning the poorer state, the harder that tax would hit each individual member of that state. So, until the 16th Amendment, that was 1913, I believe, effectively, it was untenable. You couldn’t do it. All right, so now here we are, 1913. We do now have the 16th Amendment. It’s ratified. But the definition of income, when we’re talking about federal government, because it’s been carved out as a special category, has to be defined itself, all right? What does income mean when we’re talking about it as a special case in the 16th Amendment? Does it, you know, what does that word mean? Because I think it’s going to speak to what we talk about in the Moore case.
Tommy: Exactly, and the Supreme Court has sort of created a definition through case law, through a series of cases where the government has tried to push the envelope of the bounds of income, and the Supreme Court has a few times struck it down and pushed it down. back and said, no, that doesn’t qualify as income. So, the key seminal case is an early case called McComber v. Eisner. This is one where the federal government tried to impose taxes on essentially what would be called today a stock split. This is where you might own, you know, there might be a million shares out of a stock and each share is worth $50. They instituted a split. Now there are two million shares, but each is only worth $25. So, no one really owns anything more, really. The number of their shares, they own doubles, but the value of each share is cut in half. But the federal government tried to nonetheless impose a tax when that happens, basically tax everyone who owns stocks when a stock split occurs. And the argument the government made is, yes, okay, they aren’t really gaining anything more in terms of the value of this stock from the split self, but it’s a proxy or it’s a sign that there has likely been growth in the company they own. Stock splits usually happen once a company’s overall value has grown so much that the value of each individual stock has roughly doubled and then they do a split to kind of bring it back down to where it was. So, they said treating this as a proxy were allowed to tax stock splits because it’s a proxy for people who owning shares in companies that have grown a lot. And the Supreme Court said, even if that’s true, even if this is a proxy, and even if everyone’s subject to this does own shares that have grown a lot, that’s still not realizing income. Because until they get paid a dividend, or until they sell it for a capital gain, they haven’t had any sort of benefit from this doubling. I mean, think about it. It could be that the company goes bankrupt the next day, and then the shares they own go to zero. So, these are potential capital gains, but not yet realized capital gains and the Supreme Court struck down that tax. So that’s really the foundational precedent that says you can’t use things as proxies or you can’t just treat wealth appreciation as if it’s income.
Joe: Okay. All right, so the bright line there is, again, though the government has tried creative ways to access money that has yet to be received, the real bright line seems to be that though your asset may have appreciated either through proxy or some notional, let’s say stock market spot price or something, it’s not your money, it’s not income, it’s not taxable until you either receive it or get control of it. Is that roughly the line?
Tommy: Yeah, that’s exactly it.
Joe: Okay, all right. So now we come to the Moores, which is it sounds like a pretty similar case, whereby they have an asset, it’s in a foreign country company, and it’s gone up in value. But yet, they haven’t received this money. Now, I want to put a pin in this idea that often companies will retain earnings or not distribute their profits or their earnings and choose to do other things with it. But this company did produce a profit that they retain. In other words, they reinvested it. It sounded like a very good company that had helped small businesses in India. But rather than distribute it to the Moores, they kept it the value of that firm, presumably because of the growth of the retained profits grew, the Moores didn’t see a penny. How is it that there’s any claim to the increase in the asset as defined as income?
Tommy: So, I would say that there are two — there’s one precedent and there’s one other aspect of the tax code — which the Ninth Circuit, at least, relied on heavily to say it’s okay to treat this as an income tax. So, the precedent is called Helvering v. Horst, and that was one where, roughly speaking, a father bought a certain instrument like a bond, gave it to his son as the gift. Eventually, that came due, the son received money from it. And the question was whether the income tax could be then imposed on the father, rather than the son. And the Supreme Court said, “Yes, it can be. You don’t have to literally receive cash money to necessarily realize income. You can have other types of benefits, such as the benefit of knowing that your gift has essentially accrued, that the person you wanted to give the money to has now received their money.” So essentially, when someone gives a gift, you can tax the person who gave the gift rather than the person who received the gift. But still, so the question and what some people have interpreted that case to mean is you don’t have to realize income at all to be taxed.
That’s what the Ninth Circuit said when the Moores challenged this case and challenged this tax, and the Ninth Circuit rejected it. But the alternate reading that I think is correct is that the Supreme Court was simply saying realizing can have broad meanings — that it refers to some sort of benefit, but it doesn’t have to be literal monetary benefit. It can be an emotional benefit or some gaining of control or something like that. So that’s what makes it a little bit more difficult sometimes to draw that line of what’s realization, given that it’s more than just taking in money. If it were just taking in money, it would be a very easy line to draw.
And then the second precedent, not a judicial precedent, but a practical precedent is the so-called Subpart F of the tax code. And the MRT in some case sense was based on subpart F, but it expanded it in an important way. So, Subpart F similarly taxed people on mere ownership in foreign corporations, even if they didn’t distribute dividends, but importantly, it was only based on one year at a time. And so, it was more plausible to say, as somewhat of a legal fiction,
that ownership in that particular year of a stock of a company that was expanding was likely to go along with certain increases in ability to control that company or ability to take advantage of that increase in the value of the company in some way. What the MRT crossed the line that none had crossed before was treating accumulated increase in value back years or decades as a legal fiction, as income. But the Ninth Circuit essentially didn’t see a real distinction between Subpart F and the MRT. So, it said assuming Subpart F is constitutional, which the Supreme Court has never upheld it, but it’s been on the books for 60 years — assuming that’s constitutional, they said we have to uphold the MRT. They said otherwise, if we strike down the MRT, the 60-year-old law is going to have to be struck down too, and we don’t want to rock the boat.
Joe: Yeah, it seemed to me, and again, we’re going to talk about that now, the oral arguments, it seemed both sides were worried that, regardless of which way this goes, it’s going to disrupt the past or the status quo, right? That the status quo is at risk, either way that the Supreme Court argues. or decides. So, let’s get to the actual oral arguments. Again, I mentioned earlier, it was what I think it’s soon to be becoming a legend, Elizabeth Prelogar, who argued for the U.S. What was the crux of the U.S. argument here, given the precedence you described? What was sort of the essence of her argument saying, look, the Moores owe this tax?
Tommy: I think she was very smart to back away somewhat from the more extreme position that the Ninth Circuit took. So, when the Ninth Circuit upheld it, they essentially said there’s no realization requirement and Congress, the 16th Amendment, allows Congress to define income however it wants. In other words, we as courts just need to back off and not draw any line. Prelogar, I think very smartly, realized that the Supreme Court isn’t going have an appetite for that, but that that was essentially make the 16th Amendment a dead letter if there’s no judicial enforcement of it whatsoever. So, she’s somewhat hedged on whether this is realization or not, but she left the door open and I think she probably thinks this is the more likely winning argument to say this was in fact realization, just under a broader interpretation of what realization means — that if you look at precedents, or at least practices like Subpart F, this isn’t really that different from it and you can at least make some sort of stretch of a case but still a case that ownership in something that has appreciated gives you certain benefits that you can take advantage of that perhaps ownership of some of stock that has appreciated could give you more leverage in negotiations or things like that. So, in other words I think she was arguing for a very broad interpretation of realization, but still keeping realization there as some line that the government can’t cross so that the Supreme Court feels like it’s at least not, you know, opening the door to anything and everything.
Joe: Well, I think in listening, again, I’m the layperson, you’re the expert. I just listened, I didn’t actually, I wasn’t in the room, but it seemed like it was a colorful debate as to sort of everybody seems to be an originalist now and they’re trying to debate whether income — the word realized was left out of the 16th Amendment — and there’s sort of a debate whether that was deliberately left out, meaning it didn’t have to be realized, didn’t have to be accepted. And others saying income, you know, the definition of income, saying realized income is almost redundant. No, income is an income realized. Well, say more about this debate and whether you think it’s subsequently matters.
Tommy: I think it does matter. I mean, it is tricky because the 16th Amendment is pretty spare. I do think that the Moores, the challengers, had some convincing arguments from things like dictionaries at the time, and it often was in reference to realization. And I think you could just ask sort of what’s the alternative? What’s the line besides income that’s meaningful, but that goes beyond realization, especially if realization is defined broadly? I thought the arguments were somewhat frustrating, in that there was a lot of sort of amorphousness between, are we arguing for a very broad definition of realization, or are we arguing that realization isn’t aligned and that you can somewhat go past it. But either way, it sort of comes out the same way in that I felt like the government was saying, either way, it’s a very wide latitude, but it’s not an infinite latitude. Importantly, you know, saying, you don’t have to worry about your opening the door to a future wealth tax or a future property tax on every house anyone owns.
Joe: Well, again, then the oral argument went into these sort of scenarios, which I was very sympathetic to these arguments, which say, OK, if we sort of either throw out or define broadly realized, or say that it’s almost superfluous, you know, I don’t know how that would work. in that we all, well, perhaps not all, but we all make money from income, and we all make money from investments or the appreciation of our investments, our house or something like that. You know, broadly speaking, we don’t pay income or capital gains tax until we earn the money, or we sell the asset. You know, I think our listeners will relate to the fact they may own a house, they may have bought it for a million bucks, 10 years later, they sell for two million bucks. They know they’re not paying, you know, $100 ,000 worth of appreciation tax every year. They essentially don’t pay that till they sell the house. If the Moores — or this case is ruled in the way the justices seem sympathetic to — wouldn’t this open the door to taxes on notional income that isn’t realized is just the appreciation of an asset?
Tommy: That’s definitely the concern. And one thing to stress is that there’s a difference here between federal versus state or even local. And we do sometimes see especially local, you know, property taxes at the local level going to pay for public schools and things like that. But it’s always been an important distinction that those are set by governments at the local or state level, which are more connected to each individual taxpayer. So, you don’t have the concern of the national government imposing taxes on a bunch of rich people in one state because voters in some other states wanted to do that. So, to the extent that we have property taxes currently, they’re a little more democratically justified, or there’s that protection of only being at the local level. So, it would be an entire sea change to if we suddenly had the equivalent property taxes like the kind you pay for public schools now being imposed by the federal Congress nationwide. I do think the Supreme Court is concerned about that, and they seemed like they were looking for the Solicitor General give them some kind of line to reassure themselves that they’re not opening to the door to that, which is why I lean towards the view that they’re not — even if they do uphold this law, which perhaps they’re leaning towards — they want if they seemed like they were looking for some way to uphold it while keeping that realization argument and saying this was in some way realized even if you kind of have to squint a little bit to see it.
Joe: Well, that’s a bit reassuring. Again, I like to ask these questions because as I’ve started to study the Supreme Court a little more, I realized it’s not just nine faces. Each justice sees the world very, very differently and the law very, very differently. Did you see in these back and forth of the oral arguments any clear divide between sympathies, you know, through what we traditionally think of as left and right, you know, Republican appointed justices versus Democrat, I think, I don’t know who you would consider farthest right, maybe Thomas or Alito and farthest left, certainly Sotomayor, were the nature of their questions, informed and be sympathetic to one side or the other.
Tommy: Certainly, Justice Kagan and Sotomayor were particularly concerned about striking down a lot of previous precedents and striking down the notion of what Subpart F have to fall and things like that. And Justice Kagan, there was one amusing moment. Justice Kagan is the only former Solicitor General herself currently on the Supreme Court. And she came to the defense of the current Solicitor General at one point when some of the more conservative justices were pushing her on the fact that she refused to explicitly kind of disavow the constitutionality of anything in the future. Justice Kagan said, well, isn’t it literally your job to potentially defend whatever the government does in the future? So, we can’t really hold that against you because you would have to come back and defend any law that was passed in the future. So, in other words, Justice Kagan making the point that is correct that ultimately the court has. has to bear the responsibility to draw those lines. You can’t ask — you can’t expect the government’s lawyer to draw concessions about what the government can’t do in the future. Among the more right-leaning justices, there was definitely a split with a few, Justice Alito especially, were extremely skeptical and focused on the potential negative effects of opening the door to taxes on unrealized income. I felt that others like Justice Gorsuch were really looking for some kind of compromise. And Justice Gorsuch even suggested, well, given that the Ninth Circuit didn’t treat this as realization, could we even send it back? Could we remand it? Could we say you do require realization, but since it wasn’t really briefed focusing on that as much, do we send it back for the Ninth Circuit to decide whether, in fact, there was realization here after we tell them that you need to find that to uphold the law. So, a lot of justices put very different possible outcomes on the table.
Joe: For me listening again as a layperson, it seemed to me that justices or maybe the argument or the whole aura of the thing, I mean, I don’t think people sort of understand the notion of either retain profits or earnings that, you know, I would use an example very simple example —you know if I have a stock that’s worth a hundred dollars and that share earns ten dollars that year, the company has a choice it can distribute it as a as a dividend and then I get it and I spend I get income tax or they retain it and build a new factory with it, right and then in theory my share instead of a worth a hundred now It’s worth a hundred and ten dollars and someday the government will get its money. When I sell that share, but ultimately though my share has gone more valuable, I don’t pay any tax. That’s kind of how it works, right? And that’s how it’s supposed to work. Do you see, like, there seem to be nobody sort of grasping the idea that there’s a value in leaving these earnings or profits in the hands of those creating the profits so as to, you know, say, compound those profits. Did you see any tension there that seemed an uninformed viewer or entirely legalistic rather than, frankly, an accounting question?
Tommy: Right. Well, this can be obviously one of the frustrations of legal cases and legal argumentation is that sometimes you do kind of focus down on the trees of the legal question and miss the forest of, you know, would this be good policy or not? Now, you know, the Supreme Court to its credit knows to somewhat stay in its lane, and it’s laying really is just a legal question, the constitutional question. But I do think you’re absolutely right that as we’re discussing this case, we certainly shouldn’t lose sight of the policy issues, the problems as a policy matter that come from jumping into that process early, you know, taxing people before they’ve actually realized anything from it. I think the Supreme Court, you know, they will often be self-deprecating when any case comes up about how they’re not subject-matter experts, whether it’s tech, whether it’s business, and so on. And that’s true here. So, to some extent, it may be a bit disappointing, but it’s not surprising that they mostly stuck in their line, lean to history of the 16th Amendment, the language, and the precedents they have to work with and so forth.
Joe: Again, soapbox alert here, I think I worry that if we start taxing a notional increase in value, A, it’s very hard to assess. right? Like a wealth tax, how much is your house really worth? You don’t know until you actually sell it or your company that, yeah, we can guess, and that’s why we have a stock market, but just as the stock market fluctuates moment to moment, the actual value of a company doesn’t, you know, it’s just, you know, it’s imagined until it’s ultimately sold. Do you see sort of, you know, investors shaking in their boots or you’re like what possible response, you know, would it be a legislative response? What kind of bulwark would we have against let’s say, suddenly saying to the government, sure, you know, if you think that person’s wealthier, I think that the term to use from point A to point B or a moment in time to a moment in time, defining income as the difference between what you were worth yesterday and another day, that delta, both in income and value of your assets is actual income. That’s to me like made the hair on the back of my neck stand up What do you think about that?
Tommy: Well, that’s the concern is that if the Supreme Court opens the door then the only veto gate left is Congress and the president now. Obviously, you would still have to pass the Supreme Court saying it’s hypothetically constitutional to do X doesn’t mean X is immediately enacted You still need to get it passed through the House and the Senate and signed by the president president. But that’s still, you know, you can never predict which way the political winds are going to blow, and things get lots of popular attention, especially more populist policies. You can see a lot of popularity kind of snowball for it faster than you might think. So, it certainly is concerning. Now, I think you can still make a lot of good policy arguments as you’re pointing out to oppose that in the future. But certainly from a legal perspective, you’d much prefer that the court draws the line now and I think one point about this case is it’s I think it’s actually good that this is a rather obscure law that they’re deciding this issue under, because there would be a lot more political heat and that might be sort of obscuring things if this were happening over say a President Elizabeth Warren signed wealth tax 20 years from now then you know every every partisan in the country is going to be fighting about it, and there might be more heat than light. Here at least we kind of have a little niche thing that most people didn’t even notice in the Trump tax cuts. And so, we can be a bit more legalistic and go back to first principles without it kind of devolving into intense, you know, partisan fighting, like in say the Obamacare case.
Joe: Okay, so let’s spell it out we can, win, lose, or draw, you can’t know. I guess this case will be handed down in the spring. You can’t know how they’ll rule. I think it’s a coin toss listening to the questions and trying to guess how they’ll rule. I think what you suggested — and I think what even Solicitor General Prelogar reassured the court — that this ruling would be very narrow. It wouldn’t be broad sweeping, it would be just the facts in this case, which maybe makes it less useful. But let’s play it out. What’s the worst case for the Moores? What’s the worst case for the U.S.? And what’s the narrowest definition that could just in a sense leave us where we started?
Tommy: Yeah. Well, worst case for the Moores is that they fully adopt the Ninth Circuit approach. So, the Ninth Circuit said no realization whatsoever. It’s up to Congress. In other words, the 16th Amendment almost in my view becomes an inkblot for Congress to fill in the gaps, and it’s just a political question — that in other words, as long as Congress wants to say it’s income, that’s when it’s income. I don’t think the Supreme Court will do that, but we saw the Ninth Circuit do that. So, it’s not entirely out of the question. So that would be the worst-case scenario for the Moors. Worst case scenario for the U.S. is that they do reach beyond just this tax, and they say, you know what, we’ve never looked at Subpart F, the tax dimension that’s been on the books for 60 years, but that doesn’t really make a lot of sense either. And they say, you know, we’re going to set down a rule that any appreciation in tax held can’t be treated as income. And if that means that a likely challenge to Subpart F in the future would succeed as well, fine, that’s the line we’re drawing. I don’t think they’ll go to either of those extremes, but those are both potentially on the table. What I think that they will do is — what I think they want to do, as you said, is rock the boat as little as possible — have some ruling that doesn’t affect any taxes currently on the books, except maybe this one, but also that doesn’t necessarily open the door for any future taxes that would push the envelope further besides this one. So, in other words, they want to either strike down or uphold this tax without really affecting the people who have said or thrown out numbers like you’d lose a trillion dollars in revenue if other taxes like this were struck down. And I think that’s made them a bit nervous.
Joe: Or on the flip side, realize trillions of dollars in new revenue if it’s broadly interpreted in favor of U.S.A. So, lots at stake. So, we’re getting close to the end of our time together. I hope we’ve piqued the interest of our listeners, both, let’s say, the accountants among us, tax accountants, attorneys, but also just ordinary citizens thinking, can the government go after my investments? And ultimately, I think this reflects a bigger disfavor for investment, earned so-called unearned income or money made from other money. Yeah. I’ll get on my soapbox and say look I think an income from hard work is virtuous, but we ultimately invest it’s money that we’ve already earned it’s already been taxed we can either spend it or invest it and if you take away that investment incentive we might as well just go out and you know blow it you know you investment money is the money that you risk in order to you know make more money You might lose it, or you might get more money. I don’t know why that’s fallen so out of favor, you know, but it has. So, this, I think this case definitely stokes those flames of people who perceive, let’s say, a sort of a Marxist theory of value, the labor theory of value, which is money for money, money on money, is sort of ill-gotten somehow. But I’d say the difference between the U.S. and our prosperity and either you believe the U.S. works harder or you think investments make us wealthier. Pick your adventure. All right, so we’ve run out of time. Where can our listeners who are now excited about this case learn more about your reading, your writing, your amicus brief and ultimately your views on the likely outcome of this case?
Tommy: Absolutely. Absolutely, so you can go to my page and see all my writings at the Cato website. So, I’m at cato.org/people/Thomas-Berry. You can also, once you go there, you can search for Moore and it’ll pop up pretty quickly. If you want to go to our amicus brief specifically, it’s at cato.org /legal-briefs/moore-v-united-states-one.
So probably just, probably just Googling Cato Moore v. United States would be faster. But either way, yeah, would love for people to go there. You can read kind of a 500-word summary of it at that page and then you can click on the PDF if you want to read the whole brief.
Joe: Wonderful, yeah. And of course, you’re very avid tweeter on these topics. So, you keep us all sort of abreast of what’s going on while we sleep. So thank you for joining me again on Hubwonk, Tommy, you always, always a great asset. and you make some dry topics come to life. You really are great at explaining complex issues to late people like me. Thank you for your time.
Tommy: Thank you very much, happy to.
Joe: This has been another episode of Hubwonk. If you enjoyed today’s show, there are several ways to support Hubwonk and Pioneer Institute. It would be easier for you and better for us if you subscribe to Hubwonk on your iTunes Podcatcher. It would make it easier for others to find Hubwonk if you offer a five-star rating or a favorable review. And of course, we’re very grateful if you share Hubwonk with friends. If you have ideas or comments or suggestions for me about future Hubwonk episode topics, you’re welcome to email me at hubwonk@pioneerinstitute.org. Please join me next week for a new episode of Hubwonk.
Joe Selvaggi talks with CATO Institute constitutional scholar Thomas Berry about the recently argued Moore v. U.S.A. case, which challenges the idea that income must be realized before it can be taxed.
Thomas Berry is a research fellow in the Cato Institute’s Robert A. Levy Center for Constitutional Studies and managing editor of the Cato Supreme Court Review. Before joining Cato, he was an attorney at Pacific Legal Foundation and clerked for Judge E. Grady Jolly of the U.S. Court of Appeals for the Fifth Circuit.
This week on The Learning Curve, guest co-hosts Prof. Albert Cheng of the University of Arkansas and Andrea Silbert, president of the Eos Foundation, interview Francine Klagsbrun, the author of Lioness: Golda Meir and the Nation of Israel. They discuss the story of the woman who left Kiev as a child, grew up in Milwaukee, emigrated to Mandatory Palestine, was a signatory to the declaration of independence for the state of Israel, and rose to become that nation’s fourth prime minister. Klagsbrun discusses Meir’s role in peace and war, her model of democratic leadership, and what young people today can learn from her remarkable life and legacy. She closes the interview with a reading from her biography of Golda Meir.
Stories of the Week: Andrea discussed a story from NBC News about the rise in antisemitism on American college campuses this fall, with 73 percent of Jewish students reporting having experienced or witnessed antisemitism. Albert discussed a Washington Post story about teacher turnover in the Washington, D.C. public schools.
Guest:
Francine Klagsbrun is the author of more than a dozen books, including The Fourth Commandment: Remember the Sabbath Day; Jewish Days: A Book of Jewish Life and Culture Around the Year; and Lioness: Golda Meir and the Nation of Israel, which received the 2017 National Jewish Book Award/Everett Family Foundation Book of the Year. Klagsbrun was a regular columnist for The Jewish Week, a contributing editor to Lilith, and on the editorial board of Hadassah magazine. Her writing has also appeared in The New York Times, The Boston Globe, Newsweek, and Ms. Magazine. She lives in New York City.
Tweet of the Week:
"Increasingly impressive transcripts and rising grades have yielded less actual student learning. How can that be? It’s because course titles and grades are cheap." https://t.co/Fg8fTs7HRA
— Education Next (@EducationNext) December 4, 2023
“She’s a good girl. She helps me a lot. She has big, big dreams. I don’t have the money, but she has big dreams. I hope she’s going to get everything, but she works so hard. She works so hard in school.”
“Our family is needing to make some really big sacrifices because we believe this is important, and so, we’re basically going to do whatever it takes… Sometimes we look at each other and go ‘I don’t know if I can do it again another month…’”
“A lot of the families have to sacrifice and work multiple jobs… And just scraping together enough money to just make tuition, just the basics.”
“It is discriminatory, that parents who want to choose an alternative to public school for their children, would not in any way receive any compensation for that, whether it be tax credit, whether it be a voucher…”
In the 1840s, nativist movement leaders formed official political parties and local chapters of the national Native American Party (later the American Party), although they continued to be commonly known as the Know-Nothing Party. Politicians sought to insert provisions into state constitutions against Catholics who refused to renounce the pope. The Know-Nothing movement brought bigotry and hatred to a new level of violence and organization.
The party’s legacy endured in the post-Civil War era, with laws and constitutional amendments it supported, still today severely limiting parents’ educational choices. A federal constitutional amendment was proposed by Speaker of the House James Blaine prohibiting money raised by taxation in any State to be under the control of any religious sect; nor shall any money so raised or lands so devoted be divided between religious sects or denominations. These were then named the Blaine Amendments of 1875.
in recent decades, often in response to challenges to school choice programs, the U.S. Supreme Court has demonstrated great interest in examining the issues of educational alternatives and attempts limit parental options. Massachusetts plays a key role in this debate. The Bay State was a key center of the Know-Nothing movement and has the oldest version of Anti-Aid Amendments in the nation, as well as a second such amendment approved in 1917. Two-fifths of Massachusetts residents are Catholic, and its Catholic schools outperform the state’s public schools, which are the best in the nation.
This week on The Learning Curve, guest co-hosts Prof. Albert Cheng of the University of Arkansas and Alisha Searcy interview journalist Emily Hanford, host of the hit podcast Sold a Story: How Teaching Kids to Read Went So Wrong. Ms. Hanford discusses how she became interested in the science of reading, the growing consensus around phonics as the best way to teach children to read, the impact of the digital age on learning, and the importance of academic background knowledge for schoolchildren’s learning. She offers her thoughts on how to reverse dramatic declines in NAEP reading test scores and the different kinds of reading that young people should be doing, including fables, poems, myths, fiction, history, and biography, that give them the wider vocabulary and knowledge to be good readers.
Stories of the Week: Albert discussed a story from Axios about U.S. students’ math scores plunging in the PISA global education assessment; Alisha commented on a story in USA Today about how, despite the ongoing growth of private, charter, and homeschooling during the COVID-19 pandemic, most U.S. students continue to attend a traditional district public school.
Guest:
Emily Hanford is host of the hit podcast Sold a Story: How Teaching Kids to Read Went So Wrong, the second-most-shared show on Apple Podcasts in 2023 and one of Time Magazine’s top three podcasts of the year. Sold a Story has garnered some of the highest honors in journalism, including the Murrow, the IRE, two Scripps Howard awards, a Third Coast Impact award, and a Peabody nomination. Hanford has been covering education for American Public Media since 2008 and working in public media for 30 years. She has won numerous awards for her work, including the EWA Public Service Award in 2019 for Hard Words and an award from the American Educational Research Association for Excellence in Reporting on education research. She is based in the Washington, D.C. area and is a graduate of Amherst College.
"Driving across tracts of new-home development in El Paso, Texas, one can’t miss the signs of charter-school momentum." https://t.co/GaqTfVH18h
— Education Next (@EducationNext) December 11, 2023
Click here to read a transcript
Transcript: SCOTUS Wealth Tax: Are Appreciated Assets Income?
Hubwonk Episode 181 December 12, 2023
This is Hubwonk. I’m Joe Selvaggi. Welcome to Hubwonk, a podcast of Pioneer Institute, a think tank in Boston. For most of the history of the United States, a federal income tax was deemed unconstitutional. But the ratification of the 16th Amendment in 1913 erased that constraint with a single sentence: “The Congress shall have the 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.” Since 1913, taxable income has been understood to be money that is either earned through a paycheck or from profit earned from the sale of an asset. But the U.S. government is challenging that interpretation of income, taking its case, Moore v. U.S.A., to the Supreme Court. In oral arguments heard last week, the U.S. Solicitor General asserted that taxable income may also be levied on the increase on the value of an asset, regardless of whether the owner realizes any of the income from that asset. While the details of this case involve unusual tax provisions on American ownership in foreign companies, the principle at stake is whether income must be realized in order to be taxable. Such a shift in definition could redefine all appreciation assets as taxable income, inviting investors to face a tax bill long before a single cent of income is ever received. Could an adverse decision in the Moore v. U.S.A. case usher in a new regime of taxing appreciated investment, including assets such as a house, in the same way as realized income? My guest today is Tommy Berry, editor-in-chief of the Cato Institute Supreme Court Review, who co-authored an amicus brief in the recently argued Moore v. U.S.A. case. Barry has examined the legal precedence and constitutional history of the U.S. federal income tax and has written extensively on the constraints the Constitution imposes on congressional prerogatives. Attorney Barry will share with us his views on the facts in the Moore v. U.S.A. case, the insight the oral arguments offer on the nine justices’ view on tax law, and the possible effects on American investors if the highest court redefines asset appreciation as income. When I return, I’ll be joined by constitutional scholar, Attorney Tommy Berry.
Okay, we’re back. This is Hubwonk. I’m Joe Selvaggi. I’m now pleased to be joined by Hubwonk listener favorite and editor-in-chief of the Cato Institute Supreme Court Review, Attorney Tommy Berry. Welcome back to Hubwonk, Tommy.
Tommy Barry: Thanks for having me.
Joe: All right. Before we, I’m going to surprise you with this remark — before we dive into our topic today, which is going to be about taxes and the Supreme Court’s ruling about taxes I want to congratulate you on your recent induction into the esteem ranks of the lawyers of the Supreme Court I’m not sure what the title is, but before we get started share with our listeners what happened and how you were fortunate enough to be among the elite attorneys who can stand there before the Supreme Court.
Tommy: Oh well, you’re overselling it a bit, but I appreciate it. Thank you. It requires the arduous task of having been a lawyer for three years, having $200 and having two current members of the Supreme Court bar who are willing to vouch for my character. So that was and filling out many, many forms. And then when you do all that, you get an invitation to come to the Supreme Court and be sworn in in person, which I wanted to do. I was eligible during COVID, but you know, getting sworn in just through me. a piece of paper isn’t as exciting. So, I held out for when they started doing it in person again. And just so happened to luck out that the data I was assigned was a pretty big oral argument, a case called Rahimi about the Second Amendment. And what’s really cool is on the day you get sworn in, you get absolute front row seats. I was literally sitting two feet behind council table at the front of the Supreme Court, and my boss and mentor Clark Neily at Cato Institute gets to go up to the lectern and personally ask the Chief Justice to admit me to the court, and the Chief Justice makes eye contact with me and says, “Mr. Barry, your motion is admitted.” So, I definitely recommend it, and even if you’re never going to argue at the Supreme Court, which I certainly won’t, I don’t think — it’s an experience worth doing.
Joe: Wonderful. Yes, we’ve had our Clark Neily on the show to talk about Rahimi, so great. You’ve got an exciting front row seat to a very exciting case that we’ve talked about on the podcast as well. So, we’re going to be talking about a different case today, one called Moore v. U.S.A. which recently or earlier this week we heard oral arguments. Familiar phase again from Rahimi there was the solicitor general Elizabeth Prelogar, who’s becoming quickly infamous in her skill as arguing on behalf of the U.S. But anyway, we want to talk about the facts. Let’s start just basically at a very high level just to pique our listeners’ interests. What were the basic contours of the case? You’ve been part of an amicus brief for this case. What were the facts in this case at a very high level?
Tommy: Sure. So, this goes back to a political compromise in 2017, shortly after President Trump took office, you know, one of his first big legislative accomplishments was the Tax Cuts and Jobs Act. It cut taxes in a lot of areas. It reshaped the way that foreign taxes on foreign corporations that U.S. shareholders may own part of — it kind of changed the way that system worked. There was concern mostly on the Democratic side of the aisle that it might cause too much of a short haul in tax revenue, especially in the U.S., especially in the United States. the short term. So as a compromise, they invented a one-time only very unusual tax that they called the mandatory repatriation tax (MRT). And it kind of invented a legal fiction that said for one time only for 2017 tax year and only 2017 tax year, we’re going to tax certain shareholders who own at least 10% of foreign corporations as if they had been receiving dividends for the whole length of time that they’ve owned these corporations going back years or even decades. So, it sort of looks at what was the earnings of that corporation during whatever time that they held that shares in that corporation and treated it as if they had made a profit off of it, even if in fact they had not, which is why I call it a legal fiction. And unusually, it didn’t look at just one year, it went back for however long that they held ownership stake.
Joe: Okay, so we’ve got some facts in the case. We have a couple. I’ll just introduce some sort of more specifics. I think they invested about $40,000 in a firm that’s in India. I think they co-invested with a friend. They own about 13%, which clears that 10% or more share. As you mentioned, it’s a 2017 Tax Cuts and Jobs Act, and they sort of got swept up in this so-called mandatory repatriation tax, but they had never actually received the penny from this company. They just essentially, notionally, their value in the firm had increased. I don’t have that number in front of me. But effectively, this is a tax, in this case, on the notional increase in their value of their assets, not actual income that they’ve received. So, we’re going be talking a lot about income, what that means, about how it is that the government is able to tax us, the federal government is able to tax us. So, let’s get a little history lesson here before again, we dive into the facts more deeply in this case. How is it that the U.S., the federal government can tax our income? Again, I think our listeners might be surprised to learn that for the vast majority of our country’s history, we didn’t have a federal income tax. Where does that come from? And how is that constitutional?
Tommy: That’s right. So, during the Constitutional Convention, there were many compromises as a anyone with some knowledge of that history knows many of the compromises were about big states versus small states. One of the fights was about, you know, the Congress, the House and Senate — should one represent larger states more? The smaller states didn’t really like that there was a U.S. House where the big states would have more representation. So, they got a concession that kind of what the Framers thought was a clever, a clever sort of two sides of the coin compromise, which was that not only would larger states have more members of the House of Representatives, they would also have to pay more in so-called direct taxes. Now they didn’t define what that term was, but essentially they said whatever a direct tax is, that that would be apportioned among the states based on population, the same population formula that’s used to allocate representatives. So, if at the time Virginia was three times as populous as Rhode Island, you would have to take three times as many direct taxes from Virginia as Rhode Island. Now what might immediately become apparent there is that that makes no reference to the incomes of the various states, and not every state has the same level average level of income. Some states have much higher per capita income than others do. So, it quickly became apparent that if an income tax is a direct tax, it wasn’t going to be feasible to impose an income tax on the basis of income across the states. So, to use a modern-day example, I think Massachusetts has the highest per capita income. I think Mississippi might have the lowest, but if they have roughly equal populations, you would have to, under this original rule, take the same amount roughly based on their populations from those two states with no regard to the fact that people are making way more money in Massachusetts. So, the federal government tried to impose an income tax. They argued that it’s not a direct tax, but the Supreme Court in a case called Pollock in the early 20th century said, “No, this is a direct tax. You do have to apportion it, and therefore we’re striking it down.”
And at that point, it became apparent that the only way to impose an income tax would be to pass a constitutional amendment that exempts income taxes from this apportionment requirement. The apportionment requirement effectively made it infeasible to impose a federal income tax. And that’s exactly what happened. The 16th Amendment, as a direct response to Pollock, was proposed, was enacted and ratified, and it exempts income taxes from the apportionment requirement. And ever since then, we’ve had a federal income tax for that reason.
Joe: Okay, so I think I’m keeping up. We wouldn’t want Mississippi and Massachusetts to pay the same tax per capita because, presumably, we’d be severely regressive, meaning the poorer state, the harder that tax would hit each individual member of that state. So, until the 16th Amendment, that was 1913, I believe, effectively, it was untenable. You couldn’t do it. All right, so now here we are, 1913. We do now have the 16th Amendment. It’s ratified. But the definition of income, when we’re talking about federal government, because it’s been carved out as a special category, has to be defined itself, all right? What does income mean when we’re talking about it as a special case in the 16th Amendment? Does it, you know, what does that word mean? Because I think it’s going to speak to what we talk about in the Moore case.
Tommy: Exactly, and the Supreme Court has sort of created a definition through case law, through a series of cases where the government has tried to push the envelope of the bounds of income, and the Supreme Court has a few times struck it down and pushed it down. back and said, no, that doesn’t qualify as income. So, the key seminal case is an early case called McComber v. Eisner. This is one where the federal government tried to impose taxes on essentially what would be called today a stock split. This is where you might own, you know, there might be a million shares out of a stock and each share is worth $50. They instituted a split. Now there are two million shares, but each is only worth $25. So, no one really owns anything more, really. The number of their shares, they own doubles, but the value of each share is cut in half. But the federal government tried to nonetheless impose a tax when that happens, basically tax everyone who owns stocks when a stock split occurs. And the argument the government made is, yes, okay, they aren’t really gaining anything more in terms of the value of this stock from the split self, but it’s a proxy or it’s a sign that there has likely been growth in the company they own. Stock splits usually happen once a company’s overall value has grown so much that the value of each individual stock has roughly doubled and then they do a split to kind of bring it back down to where it was. So, they said treating this as a proxy were allowed to tax stock splits because it’s a proxy for people who owning shares in companies that have grown a lot. And the Supreme Court said, even if that’s true, even if this is a proxy, and even if everyone’s subject to this does own shares that have grown a lot, that’s still not realizing income. Because until they get paid a dividend, or until they sell it for a capital gain, they haven’t had any sort of benefit from this doubling. I mean, think about it. It could be that the company goes bankrupt the next day, and then the shares they own go to zero. So, these are potential capital gains, but not yet realized capital gains and the Supreme Court struck down that tax. So that’s really the foundational precedent that says you can’t use things as proxies or you can’t just treat wealth appreciation as if it’s income.
Joe: Okay. All right, so the bright line there is, again, though the government has tried creative ways to access money that has yet to be received, the real bright line seems to be that though your asset may have appreciated either through proxy or some notional, let’s say stock market spot price or something, it’s not your money, it’s not income, it’s not taxable until you either receive it or get control of it. Is that roughly the line?
Tommy: Yeah, that’s exactly it.
Joe: Okay, all right. So now we come to the Moores, which is it sounds like a pretty similar case, whereby they have an asset, it’s in a foreign country company, and it’s gone up in value. But yet, they haven’t received this money. Now, I want to put a pin in this idea that often companies will retain earnings or not distribute their profits or their earnings and choose to do other things with it. But this company did produce a profit that they retain. In other words, they reinvested it. It sounded like a very good company that had helped small businesses in India. But rather than distribute it to the Moores, they kept it the value of that firm, presumably because of the growth of the retained profits grew, the Moores didn’t see a penny. How is it that there’s any claim to the increase in the asset as defined as income?
Tommy: So, I would say that there are two — there’s one precedent and there’s one other aspect of the tax code — which the Ninth Circuit, at least, relied on heavily to say it’s okay to treat this as an income tax. So, the precedent is called Helvering v. Horst, and that was one where, roughly speaking, a father bought a certain instrument like a bond, gave it to his son as the gift. Eventually, that came due, the son received money from it. And the question was whether the income tax could be then imposed on the father, rather than the son. And the Supreme Court said, “Yes, it can be. You don’t have to literally receive cash money to necessarily realize income. You can have other types of benefits, such as the benefit of knowing that your gift has essentially accrued, that the person you wanted to give the money to has now received their money.” So essentially, when someone gives a gift, you can tax the person who gave the gift rather than the person who received the gift. But still, so the question and what some people have interpreted that case to mean is you don’t have to realize income at all to be taxed.
That’s what the Ninth Circuit said when the Moores challenged this case and challenged this tax, and the Ninth Circuit rejected it. But the alternate reading that I think is correct is that the Supreme Court was simply saying realizing can have broad meanings — that it refers to some sort of benefit, but it doesn’t have to be literal monetary benefit. It can be an emotional benefit or some gaining of control or something like that. So that’s what makes it a little bit more difficult sometimes to draw that line of what’s realization, given that it’s more than just taking in money. If it were just taking in money, it would be a very easy line to draw.
And then the second precedent, not a judicial precedent, but a practical precedent is the so-called Subpart F of the tax code. And the MRT in some case sense was based on subpart F, but it expanded it in an important way. So, Subpart F similarly taxed people on mere ownership in foreign corporations, even if they didn’t distribute dividends, but importantly, it was only based on one year at a time. And so, it was more plausible to say, as somewhat of a legal fiction,
that ownership in that particular year of a stock of a company that was expanding was likely to go along with certain increases in ability to control that company or ability to take advantage of that increase in the value of the company in some way. What the MRT crossed the line that none had crossed before was treating accumulated increase in value back years or decades as a legal fiction, as income. But the Ninth Circuit essentially didn’t see a real distinction between Subpart F and the MRT. So, it said assuming Subpart F is constitutional, which the Supreme Court has never upheld it, but it’s been on the books for 60 years — assuming that’s constitutional, they said we have to uphold the MRT. They said otherwise, if we strike down the MRT, the 60-year-old law is going to have to be struck down too, and we don’t want to rock the boat.
Joe: Yeah, it seemed to me, and again, we’re going to talk about that now, the oral arguments, it seemed both sides were worried that, regardless of which way this goes, it’s going to disrupt the past or the status quo, right? That the status quo is at risk, either way that the Supreme Court argues. or decides. So, let’s get to the actual oral arguments. Again, I mentioned earlier, it was what I think it’s soon to be becoming a legend, Elizabeth Prelogar, who argued for the U.S. What was the crux of the U.S. argument here, given the precedence you described? What was sort of the essence of her argument saying, look, the Moores owe this tax?
Tommy: I think she was very smart to back away somewhat from the more extreme position that the Ninth Circuit took. So, when the Ninth Circuit upheld it, they essentially said there’s no realization requirement and Congress, the 16th Amendment, allows Congress to define income however it wants. In other words, we as courts just need to back off and not draw any line. Prelogar, I think very smartly, realized that the Supreme Court isn’t going have an appetite for that, but that that was essentially make the 16th Amendment a dead letter if there’s no judicial enforcement of it whatsoever. So, she’s somewhat hedged on whether this is realization or not, but she left the door open and I think she probably thinks this is the more likely winning argument to say this was in fact realization, just under a broader interpretation of what realization means — that if you look at precedents, or at least practices like Subpart F, this isn’t really that different from it and you can at least make some sort of stretch of a case but still a case that ownership in something that has appreciated gives you certain benefits that you can take advantage of that perhaps ownership of some of stock that has appreciated could give you more leverage in negotiations or things like that. So, in other words I think she was arguing for a very broad interpretation of realization, but still keeping realization there as some line that the government can’t cross so that the Supreme Court feels like it’s at least not, you know, opening the door to anything and everything.
Joe: Well, I think in listening, again, I’m the layperson, you’re the expert. I just listened, I didn’t actually, I wasn’t in the room, but it seemed like it was a colorful debate as to sort of everybody seems to be an originalist now and they’re trying to debate whether income — the word realized was left out of the 16th Amendment — and there’s sort of a debate whether that was deliberately left out, meaning it didn’t have to be realized, didn’t have to be accepted. And others saying income, you know, the definition of income, saying realized income is almost redundant. No, income is an income realized. Well, say more about this debate and whether you think it’s subsequently matters.
Tommy: I think it does matter. I mean, it is tricky because the 16th Amendment is pretty spare. I do think that the Moores, the challengers, had some convincing arguments from things like dictionaries at the time, and it often was in reference to realization. And I think you could just ask sort of what’s the alternative? What’s the line besides income that’s meaningful, but that goes beyond realization, especially if realization is defined broadly? I thought the arguments were somewhat frustrating, in that there was a lot of sort of amorphousness between, are we arguing for a very broad definition of realization, or are we arguing that realization isn’t aligned and that you can somewhat go past it. But either way, it sort of comes out the same way in that I felt like the government was saying, either way, it’s a very wide latitude, but it’s not an infinite latitude. Importantly, you know, saying, you don’t have to worry about your opening the door to a future wealth tax or a future property tax on every house anyone owns.
Joe: Well, again, then the oral argument went into these sort of scenarios, which I was very sympathetic to these arguments, which say, OK, if we sort of either throw out or define broadly realized, or say that it’s almost superfluous, you know, I don’t know how that would work. in that we all, well, perhaps not all, but we all make money from income, and we all make money from investments or the appreciation of our investments, our house or something like that. You know, broadly speaking, we don’t pay income or capital gains tax until we earn the money, or we sell the asset. You know, I think our listeners will relate to the fact they may own a house, they may have bought it for a million bucks, 10 years later, they sell for two million bucks. They know they’re not paying, you know, $100 ,000 worth of appreciation tax every year. They essentially don’t pay that till they sell the house. If the Moores — or this case is ruled in the way the justices seem sympathetic to — wouldn’t this open the door to taxes on notional income that isn’t realized is just the appreciation of an asset?
Tommy: That’s definitely the concern. And one thing to stress is that there’s a difference here between federal versus state or even local. And we do sometimes see especially local, you know, property taxes at the local level going to pay for public schools and things like that. But it’s always been an important distinction that those are set by governments at the local or state level, which are more connected to each individual taxpayer. So, you don’t have the concern of the national government imposing taxes on a bunch of rich people in one state because voters in some other states wanted to do that. So, to the extent that we have property taxes currently, they’re a little more democratically justified, or there’s that protection of only being at the local level. So, it would be an entire sea change to if we suddenly had the equivalent property taxes like the kind you pay for public schools now being imposed by the federal Congress nationwide. I do think the Supreme Court is concerned about that, and they seemed like they were looking for the Solicitor General give them some kind of line to reassure themselves that they’re not opening to the door to that, which is why I lean towards the view that they’re not — even if they do uphold this law, which perhaps they’re leaning towards — they want if they seemed like they were looking for some way to uphold it while keeping that realization argument and saying this was in some way realized even if you kind of have to squint a little bit to see it.
Joe: Well, that’s a bit reassuring. Again, I like to ask these questions because as I’ve started to study the Supreme Court a little more, I realized it’s not just nine faces. Each justice sees the world very, very differently and the law very, very differently. Did you see in these back and forth of the oral arguments any clear divide between sympathies, you know, through what we traditionally think of as left and right, you know, Republican appointed justices versus Democrat, I think, I don’t know who you would consider farthest right, maybe Thomas or Alito and farthest left, certainly Sotomayor, were the nature of their questions, informed and be sympathetic to one side or the other.
Tommy: Certainly, Justice Kagan and Sotomayor were particularly concerned about striking down a lot of previous precedents and striking down the notion of what Subpart F have to fall and things like that. And Justice Kagan, there was one amusing moment. Justice Kagan is the only former Solicitor General herself currently on the Supreme Court. And she came to the defense of the current Solicitor General at one point when some of the more conservative justices were pushing her on the fact that she refused to explicitly kind of disavow the constitutionality of anything in the future. Justice Kagan said, well, isn’t it literally your job to potentially defend whatever the government does in the future? So, we can’t really hold that against you because you would have to come back and defend any law that was passed in the future. So, in other words, Justice Kagan making the point that is correct that ultimately the court has. has to bear the responsibility to draw those lines. You can’t ask — you can’t expect the government’s lawyer to draw concessions about what the government can’t do in the future. Among the more right-leaning justices, there was definitely a split with a few, Justice Alito especially, were extremely skeptical and focused on the potential negative effects of opening the door to taxes on unrealized income. I felt that others like Justice Gorsuch were really looking for some kind of compromise. And Justice Gorsuch even suggested, well, given that the Ninth Circuit didn’t treat this as realization, could we even send it back? Could we remand it? Could we say you do require realization, but since it wasn’t really briefed focusing on that as much, do we send it back for the Ninth Circuit to decide whether, in fact, there was realization here after we tell them that you need to find that to uphold the law. So, a lot of justices put very different possible outcomes on the table.
Joe: For me listening again as a layperson, it seemed to me that justices or maybe the argument or the whole aura of the thing, I mean, I don’t think people sort of understand the notion of either retain profits or earnings that, you know, I would use an example very simple example —you know if I have a stock that’s worth a hundred dollars and that share earns ten dollars that year, the company has a choice it can distribute it as a as a dividend and then I get it and I spend I get income tax or they retain it and build a new factory with it, right and then in theory my share instead of a worth a hundred now It’s worth a hundred and ten dollars and someday the government will get its money. When I sell that share, but ultimately though my share has gone more valuable, I don’t pay any tax. That’s kind of how it works, right? And that’s how it’s supposed to work. Do you see, like, there seem to be nobody sort of grasping the idea that there’s a value in leaving these earnings or profits in the hands of those creating the profits so as to, you know, say, compound those profits. Did you see any tension there that seemed an uninformed viewer or entirely legalistic rather than, frankly, an accounting question?
Tommy: Right. Well, this can be obviously one of the frustrations of legal cases and legal argumentation is that sometimes you do kind of focus down on the trees of the legal question and miss the forest of, you know, would this be good policy or not? Now, you know, the Supreme Court to its credit knows to somewhat stay in its lane, and it’s laying really is just a legal question, the constitutional question. But I do think you’re absolutely right that as we’re discussing this case, we certainly shouldn’t lose sight of the policy issues, the problems as a policy matter that come from jumping into that process early, you know, taxing people before they’ve actually realized anything from it. I think the Supreme Court, you know, they will often be self-deprecating when any case comes up about how they’re not subject-matter experts, whether it’s tech, whether it’s business, and so on. And that’s true here. So, to some extent, it may be a bit disappointing, but it’s not surprising that they mostly stuck in their line, lean to history of the 16th Amendment, the language, and the precedents they have to work with and so forth.
Joe: Again, soapbox alert here, I think I worry that if we start taxing a notional increase in value, A, it’s very hard to assess. right? Like a wealth tax, how much is your house really worth? You don’t know until you actually sell it or your company that, yeah, we can guess, and that’s why we have a stock market, but just as the stock market fluctuates moment to moment, the actual value of a company doesn’t, you know, it’s just, you know, it’s imagined until it’s ultimately sold. Do you see sort of, you know, investors shaking in their boots or you’re like what possible response, you know, would it be a legislative response? What kind of bulwark would we have against let’s say, suddenly saying to the government, sure, you know, if you think that person’s wealthier, I think that the term to use from point A to point B or a moment in time to a moment in time, defining income as the difference between what you were worth yesterday and another day, that delta, both in income and value of your assets is actual income. That’s to me like made the hair on the back of my neck stand up What do you think about that?
Tommy: Well, that’s the concern is that if the Supreme Court opens the door then the only veto gate left is Congress and the president now. Obviously, you would still have to pass the Supreme Court saying it’s hypothetically constitutional to do X doesn’t mean X is immediately enacted You still need to get it passed through the House and the Senate and signed by the president president. But that’s still, you know, you can never predict which way the political winds are going to blow, and things get lots of popular attention, especially more populist policies. You can see a lot of popularity kind of snowball for it faster than you might think. So, it certainly is concerning. Now, I think you can still make a lot of good policy arguments as you’re pointing out to oppose that in the future. But certainly from a legal perspective, you’d much prefer that the court draws the line now and I think one point about this case is it’s I think it’s actually good that this is a rather obscure law that they’re deciding this issue under, because there would be a lot more political heat and that might be sort of obscuring things if this were happening over say a President Elizabeth Warren signed wealth tax 20 years from now then you know every every partisan in the country is going to be fighting about it, and there might be more heat than light. Here at least we kind of have a little niche thing that most people didn’t even notice in the Trump tax cuts. And so, we can be a bit more legalistic and go back to first principles without it kind of devolving into intense, you know, partisan fighting, like in say the Obamacare case.
Joe: Okay, so let’s spell it out we can, win, lose, or draw, you can’t know. I guess this case will be handed down in the spring. You can’t know how they’ll rule. I think it’s a coin toss listening to the questions and trying to guess how they’ll rule. I think what you suggested — and I think what even Solicitor General Prelogar reassured the court — that this ruling would be very narrow. It wouldn’t be broad sweeping, it would be just the facts in this case, which maybe makes it less useful. But let’s play it out. What’s the worst case for the Moores? What’s the worst case for the U.S.? And what’s the narrowest definition that could just in a sense leave us where we started?
Tommy: Yeah. Well, worst case for the Moores is that they fully adopt the Ninth Circuit approach. So, the Ninth Circuit said no realization whatsoever. It’s up to Congress. In other words, the 16th Amendment almost in my view becomes an inkblot for Congress to fill in the gaps, and it’s just a political question — that in other words, as long as Congress wants to say it’s income, that’s when it’s income. I don’t think the Supreme Court will do that, but we saw the Ninth Circuit do that. So, it’s not entirely out of the question. So that would be the worst-case scenario for the Moors. Worst case scenario for the U.S. is that they do reach beyond just this tax, and they say, you know what, we’ve never looked at Subpart F, the tax dimension that’s been on the books for 60 years, but that doesn’t really make a lot of sense either. And they say, you know, we’re going to set down a rule that any appreciation in tax held can’t be treated as income. And if that means that a likely challenge to Subpart F in the future would succeed as well, fine, that’s the line we’re drawing. I don’t think they’ll go to either of those extremes, but those are both potentially on the table. What I think that they will do is — what I think they want to do, as you said, is rock the boat as little as possible — have some ruling that doesn’t affect any taxes currently on the books, except maybe this one, but also that doesn’t necessarily open the door for any future taxes that would push the envelope further besides this one. So, in other words, they want to either strike down or uphold this tax without really affecting the people who have said or thrown out numbers like you’d lose a trillion dollars in revenue if other taxes like this were struck down. And I think that’s made them a bit nervous.
Joe: Or on the flip side, realize trillions of dollars in new revenue if it’s broadly interpreted in favor of U.S.A. So, lots at stake. So, we’re getting close to the end of our time together. I hope we’ve piqued the interest of our listeners, both, let’s say, the accountants among us, tax accountants, attorneys, but also just ordinary citizens thinking, can the government go after my investments? And ultimately, I think this reflects a bigger disfavor for investment, earned so-called unearned income or money made from other money. Yeah. I’ll get on my soapbox and say look I think an income from hard work is virtuous, but we ultimately invest it’s money that we’ve already earned it’s already been taxed we can either spend it or invest it and if you take away that investment incentive we might as well just go out and you know blow it you know you investment money is the money that you risk in order to you know make more money You might lose it, or you might get more money. I don’t know why that’s fallen so out of favor, you know, but it has. So, this, I think this case definitely stokes those flames of people who perceive, let’s say, a sort of a Marxist theory of value, the labor theory of value, which is money for money, money on money, is sort of ill-gotten somehow. But I’d say the difference between the U.S. and our prosperity and either you believe the U.S. works harder or you think investments make us wealthier. Pick your adventure. All right, so we’ve run out of time. Where can our listeners who are now excited about this case learn more about your reading, your writing, your amicus brief and ultimately your views on the likely outcome of this case?
Tommy: Absolutely. Absolutely, so you can go to my page and see all my writings at the Cato website. So, I’m at cato.org/people/Thomas-Berry. You can also, once you go there, you can search for Moore and it’ll pop up pretty quickly. If you want to go to our amicus brief specifically, it’s at cato.org /legal-briefs/moore-v-united-states-one.
So probably just, probably just Googling Cato Moore v. United States would be faster. But either way, yeah, would love for people to go there. You can read kind of a 500-word summary of it at that page and then you can click on the PDF if you want to read the whole brief.
Joe: Wonderful, yeah. And of course, you’re very avid tweeter on these topics. So, you keep us all sort of abreast of what’s going on while we sleep. So thank you for joining me again on Hubwonk, Tommy, you always, always a great asset. and you make some dry topics come to life. You really are great at explaining complex issues to late people like me. Thank you for your time.
Tommy: Thank you very much, happy to.
Joe: This has been another episode of Hubwonk. If you enjoyed today’s show, there are several ways to support Hubwonk and Pioneer Institute. It would be easier for you and better for us if you subscribe to Hubwonk on your iTunes Podcatcher. It would make it easier for others to find Hubwonk if you offer a five-star rating or a favorable review. And of course, we’re very grateful if you share Hubwonk with friends. If you have ideas or comments or suggestions for me about future Hubwonk episode topics, you’re welcome to email me at hubwonk@pioneerinstitute.org. Please join me next week for a new episode of Hubwonk.
Joe Selvaggi talks with CATO Institute constitutional scholar Thomas Berry about the recently argued Moore v. U.S.A. case, which challenges the idea that income must be realized before it can be taxed.
Thomas Berry is a research fellow in the Cato Institute’s Robert A. Levy Center for Constitutional Studies and managing editor of the Cato Supreme Court Review. Before joining Cato, he was an attorney at Pacific Legal Foundation and clerked for Judge E. Grady Jolly of the U.S. Court of Appeals for the Fifth Circuit.
This week on The Learning Curve, guest co-hosts Prof. Albert Cheng of the University of Arkansas and Andrea Silbert, president of the Eos Foundation, interview Francine Klagsbrun, the author of Lioness: Golda Meir and the Nation of Israel. They discuss the story of the woman who left Kiev as a child, grew up in Milwaukee, emigrated to Mandatory Palestine, was a signatory to the declaration of independence for the state of Israel, and rose to become that nation’s fourth prime minister. Klagsbrun discusses Meir’s role in peace and war, her model of democratic leadership, and what young people today can learn from her remarkable life and legacy. She closes the interview with a reading from her biography of Golda Meir.
Stories of the Week: Andrea discussed a story from NBC News about the rise in antisemitism on American college campuses this fall, with 73 percent of Jewish students reporting having experienced or witnessed antisemitism. Albert discussed a Washington Post story about teacher turnover in the Washington, D.C. public schools.
Guest:
Francine Klagsbrun is the author of more than a dozen books, including The Fourth Commandment: Remember the Sabbath Day; Jewish Days: A Book of Jewish Life and Culture Around the Year; and Lioness: Golda Meir and the Nation of Israel, which received the 2017 National Jewish Book Award/Everett Family Foundation Book of the Year. Klagsbrun was a regular columnist for The Jewish Week, a contributing editor to Lilith, and on the editorial board of Hadassah magazine. Her writing has also appeared in The New York Times, The Boston Globe, Newsweek, and Ms. Magazine. She lives in New York City.
Tweet of the Week:
"Increasingly impressive transcripts and rising grades have yielded less actual student learning. How can that be? It’s because course titles and grades are cheap." https://t.co/Fg8fTs7HRA
— Education Next (@EducationNext) December 4, 2023
Emily Hanford on Reading Science & K-12 Literacy
/in Education, Featured, Learning Curve, News, Podcast /by Editorial StaffRead a transcript
Transcript: The Learning Curve, December 12, 2023
Emily Hanford on Reading Science & K-12 Literacy
[00:00:00] Albert: Well, hello again, everybody. Welcome to another episode of The Learning Curve podcast. I’m your hosts or one of your co-hosts this week, Albert Cheng from the university of Arkansas and co-hosting with me today is our friend Alisha Searcy. Alisha, nice to have you back on the show.
[00:00:40] Alisha: Thank you. I’m excited to be here today and great to be with you.
[00:00:43] Albert: Yeah. It’s been a while since we’ve had you on. I don’t know if last time it was actually you interviewing me, but yeah, well, we’re driving the plane together now.
[00:00:52] Alisha: So, I’ve been hearing you, you’re doing a great job. So keep up.
[00:00:55] Albert: Thanks. why don’t we start with some news, Alisha? You know, I’ve got something hot off the press here. I mean, this is a typical thing that happens when we release international test scores. Everyone pays attention to them and so, for the listeners who maybe aren’t looped into this consider this getting looped in we have new PISA scores this is the 2022 iteration of the PISA test scores and mean, were you in the loop of this? Any, guesses on what happened with our math and reading test scores?
[00:01:23] Alisha: Well, I won’t steal your thunder. And by the way, when I saw the math scores, I immediately thought of you because I know math is your thing.
[00:01:31] Albert: Yeah, it is. Yeah.
[00:01:34] Alisha: But I’m curious to hear what your thoughts are.
[00:01:36] Albert: Well, so, you know, yeah, math being my thing. I guess it’s a little disheartening to see the math scores. Actually not just across the world, but also in the U. S. In fact, the math scores for the U. S. are the lowest that have ever been recorded since PISA has been being administered to the U.S. So, I mean, I don’t know that the numbers mean much folks, but, you know, we’re sitting at a 465[00:02:00] that’s really the lowest since uh, there’s a nice chart available, you look at this you know, lowest since 20 years ago , and lower certainly than the international average of 480, so I think that’s the big story in fact, I think it’s also, if you want to just look at a more recent look at it time window, it’s a 13-point drop since the 2018 exam. So not great to see these downward-trending lines. Now you know, we all know that some of this might be the likely the aftermath of pandemic. So, we do have our work cut out for us, I think, to try to get these to rebound. but a bit of good news, though.
[00:02:34] Albert: In terms of reading test scores, the drop wasn’t as bad.
Alisha: In fact, the good news, right?
Albert: Yeah. Yeah. You know that. So there’s a big drop across all the other countries. So again, you can encourage you to look at graphs. I mean, the figure is worth a thousand words. You just see this sharp line going downwards on reading for all the other countries. But at least for the U. S. We’ve held steady. You know, there was an increase from Of course. 2015 to 18 and it’s kind of held steady this [00:03:00] time around. So, yeah, I don’t know. I don’t know what’s going on. I don’t know if you have a crystal ball to think about what’s going on. Why the drop in math but not reading. But I’m sure there’s a lot of research and commentary and thinking to be done around that.
[00:03:12] Alisha: Well, here’s the thing, Albert and math is your thing. Reading is more of mine. And so yes, it was, I guess, better to see that our scores in the U.S. were higher than other countries. But if you were to look at NAEP scores as an example, you know that our reading scores have been low for a very long time. And in some cases lower in the last couple of years, especially the last results that came out in 2020.
Albert: Yeah, absolutely.
Alisha: Right, we’re 30 something percent, 35 percent or really less depending on what state you’re looking at of our fourth graders are reading proficiently and reading. And so, while we may be higher than other countries, it’s still low and still should be unacceptable. Yeah. It really speaks to the fact that we have a lot of work to do in all of our core content areas.[00:04:00] And social studies was also a problem, right? I know that we focusing so much on reading math and science and have not been focused on social studies. So. It really speaks to the work that needs to be done.
[00:04:12] Alisha: And it’s interesting, right? Because the article that I looked at this week was from USA Today and it’s talking about private charter homeschooling how those numbers grew after the pandemic. But most kids are still attending public schools. what was interesting to me in this article. So, I grew up in Florida. I got a great public education and I’m a product of school choice. So frankly, Albert, when I moved to Georgia and later served in the legislature, I was kind of blown away at how politically charged school choice is. And it’s certainly the case in Georgia, but in Florida, where I grew up, particularly in Miami Dade County, I think because of all of the choices that are available, even within the private sector, the public school system in Miami Dade County schools has a robust and has, I mean, I’m, I’m old, right?
[00:05:07] Alisha: I was in school in the eighties and the nineties. Choice has been very normal and just commonplace. And so, the fact that it’s politically charged in other places is odd to me. In this article, it essentially talks about how, because of the pandemic enrollment has increased in private schools and home schools and in charters.
[00:05:27] Alisha: And not only did it increase during that time, but it’s been steady. So, in other words, those parents have left their kids in those schools. And so, the questions that you have to ask, what was it about the pandemic that made parents want to make different choices? And I would say based on some of the research and just being a parent myself, we’ve got three school age kids in my house.
[00:05:48] Alisha: You know, you look at the fact that schools were closing. There are many parents who are looking for where those schools that are actually open. I think in private schools, they figured it out a little faster than public schools did. They also looked at maybe the quality of education that they were getting.
[00:06:03] Alisha: Watching their kids get educated online and seeing that that wasn’t exactly working well for a lot of kids. And so, I think there’s a lot to that. I think parents also concerned about school safety. They’re concerned about, again, how education is being delivered. And so, I say all of that to say in relation to your article, we know that most.
[00:06:24] Alisha: American kids are going to be attending traditional public schools, even with this growth in, public charter schools and at home schools. We know that number is still going to grow, but the vast majority of kids are going to be in public schools. Yeah.
[00:06:38] Alisha: And so, my issue was while the pandemic may have changed where students are going to school, it did not change enough of how school looks. And I often talk about the fact that school looks the same as it did when I was in school in the eighties and nineties, it looks the same in 2023. And if we keep delivering what I call this telegram education to a TikTok generation, kind of keep getting the results that we’re seeing. I think that’s the reason why we’re seeing the scores or in math and science and reading. Because of the way we’re delivering education, our public schools is wrong. It’s outdated. And we’re going to keep seeing these poor results until we change that around.
[00:07:20] Albert: Yeah, one of the premises of choice is we have space to try something new, try new models of, of instruction and pedagogy. And so hopefully some of that will, latch and, maybe inform how we do teaching and learning writ large. So it’s a must.
[00:07:36] Albert: Yeah, let’s hope that happens. speaking of instruction y’all should stick with us after this break, because we’re going to have Emily Hanford who’s a journalist, and I’ll introduce her in a bit here to talk to us about reading instruction and phonics instruction in particular.
[00:07:51] Albert: So, let’s see what she has to say, maybe that’ll give us some more insight into what’s going on with reading scores.[00:08:00]
[00:08:10] Albert: Emily Hanford is the host of the hit podcast, Sold A Story, How Teaching Kids to Read Went So Wrong, the second-most shared show on Apple Podcasts in 2023, and one of Time Magazine’s top three podcasts of the year. Sold A Story has garnered some of the highest honors in journalism, including the Murrow, the IRE, two Scripps Howards Awards, a Third Coast Impact Award, and a Peabody nomination. Emily has been covering education for American public media since 2008 and working in public media for 30 years. She has won numerous awards for her work, including the EWA Public Service Award in 2019 for hard words, and an award for the American Education Research Association for excellence in reporting on education research. Emily is based in the [00:09:00] Washington, D. C. area. And as a graduate of Amherst College, Emily, welcome to the show. It’s great to have you on.
[00:09:06] Emily: Hey, thank you for having me. Yeah, happy to be here.
[00:09:10] Albert: So, let’s maybe talk about how you got into this a little bit and, you’re an accomplished journalist and podcast host.
[00:09:17] Albert: You’ve written and spoken widely about reading, reading research and the science of literacy. did you first become interested in covering better ways to teach reading?
[00:09:25] Emily: Sure. I’m sure when anyone asks you an origin story like this, it depends on how far back you want to go.
[00:09:31] Emily: So I can probably take it really far back. But I’ll go into the recent history to say that I had been an education reporter. For about close to 10 years already, maybe eight years when I was doing some reporting on students who were in remedial or developmental college classes. And they were telling me about their struggles with reading and spelling.
[00:09:54] Emily: I had this extraordinary interview with one woman who talked to me sort of about how she made her way through [00:10:00] text, even though she really couldn’t read and doesn’t remember being taught how to read. Had gotten special education services, but really had never been taught how to read. She told me that she is pretty sure she has dyslexia.
[00:10:10] Emily: It’s not something that was ever identified when she was in school. Not anything she seemed to get any particularly good help for when she was in school. And so it started with an interest in dyslexia because I honestly didn’t know anything about that. So I started really digging in on dyslexia and learning disabilities and sort of taking a lot of reporting that I had been done on the area of sort of preparation for college and who goes to college and who succeeds there because we know a lot of people.
[00:10:36] Emily: So much about the importance of a college degree, postsecondary credential of some kind, and I, it really just returned me way back to the beginning. So I started exploring learning disabilities and what I realized pretty quickly, and this was definitely I was aided by a number of very active.
[00:10:53] Emily: Parents who had kids who had gone to school and had all kinds of advantages in so many [00:11:00] ways. And the parents had done all the quote unquote, right things. They’d read to their kids a lot. There were lots of books in their home. The parents were well educated, they went to school and they couldn’t read.
[00:11:09] Emily: And so what I started to realize is number one, we do have a special ed dyslexia problem, but it’s rooted in a larger problem, which is the lot of schools, a lot of teachers, a lot of educators don’t know. A lot of what there is to know about reading and how it works and how people, like, how do we even do that?
[00:11:29] Emily: How do we read? How do little kids learn to read? Why do some kids struggle so much? And I started getting into this body of research called the science of reading. So it was really the parents of these kids with dyslexia had gotten very. Vocal about the problems that their kids were having coming from, in many cases, really a place of privilege.
[00:11:48] Emily: Like, these were relatively affluent families who often had spent a lot of their own money trying to fix this problem. Thousands of dollars, in some cases tens, in one family’s case hundreds of thousands of [00:12:00] dollars. To try to get their kids the instruction they need in school. And I started to connect the dots through the help from those parents.
[00:12:07] Emily: And I actually think my reporting has even helped some of those parents connect the dots to the fact that this is a larger issue. It’s not just about kids who have a reading disability, quote unquote. But dyslexia and reading disabilities are on a continuum, and it turns out that a lot of us, in fact, maybe most of us really need some pretty good instruction to become pretty good readers and spellers.
[00:12:30] Emily: Some of us don’t. I think I was one of those people that didn’t need much instruction. I have two boys. I don’t think they needed much instruction, so I really had never thought very much about how people learn to read and how kids learn to read. And then I started getting into this and just started realizing that part of the problem, not the entire problem, but there’s an instructional issue and many, many teachers, and it’s rooted in the fact that many educators not only don’t know what they should or could [00:13:00] know about reading and how it works, and we can get to that in a minute if you want.
[00:13:03] Emily: Yep. but they, really just didn’t understand enough about reading to sort of understand what was going on with the kids who were struggling to learn how to read.
[00:13:12] Albert: Mm, hmm. Well, I mean, yeah, let’s get into that. I mean, so actually Alisha and I before the break were talking about the recent PISA scores, the recent NAEP scores, and we’ve seen that essentially you know, American K-12 students have been struggling with, reading for a while. And so, talk a bit more about how we, actually do teach reading. You know, we hear the monikers, look, say, or whole language reading. Yeah. Could you just define for our listeners? what are those and what are the strengths and weaknesses really?
[00:13:38] Emily: Sure. As soon as you get into education, as I’m sure you all know, everything gets, you know, covered in a lot of gobbledygook there’s a lot of terms to define it. And I do think that’s one of the things that my reporting has helped people do is just sort of distill this down and sort of explain some basic concepts, because I think that’s really what’s been missing. I think a lot of educators have fallen for things that aren’t true because they just haven’t had a good foundational base of understanding all this stuff that has been learned over the past, like 40 or 50 years.
[00:14:05] Emily: So the first thing I’ll say in response to your question is I think it’s important to recognize. That I don’t think there was necessarily sort of a good old days here like I sometimes hear people respond to my reporting by saying, well, we need to go back to the good old days to the traditional way of doing things.
[00:14:22] Emily: We don’t have evidence that shows us that there was a good old days, right? Since we started. Keeping track. Some of those tests that you just mentioned, the Nape and the Pisa, those are relatively recent. We’ve had a version of the Nape test actually since the 1970s. So know we’ve been struggling with this since the 1970s.
[00:14:41] Emily: the scores on that test have gotten a little bit better since the 1970s, but not very much. And I don’t think we really have any evidence to suggest that before we were measuring it, things were a whole lot better. The truth is that we lived in an economy at one point where if you didn’t have good reading skills, you could be okay.
[00:14:59] Emily: There were a [00:15:00] lot of ways to make a living and to sort of make it but you know, the world has really changed, right? So that’s why, one of the reasons why we know education is, so critical. So I think what’s really different is not that something changed and reading got so much worse. It’s that we’ve struggled with getting a lot of kids to read for a long time, by all indications.
[00:15:21] Emily: What’s changed is how much scientists have figured out about reading, how it works, and what kids need to learn, and in particular what they need to be taught, or what all kids should be taught to increase the chances that most kids can become good readers. So that’s this thing called the science of reading, which I would say is widely misunderstood in a lot of cases, but it’s really this gigantic body of research that’s been done by cognitive scientists, neuroscientists, psychologists, linguists, all kinds of researchers in labs and in real classrooms with real kids in English and in other languages, this research has been [00:16:00] done all over the world.
[00:16:00] Emily: So it’s revealed all kinds of fascinating things about How our brains read and what it’s revealed is that methods that became very popular and that versions of have been popular for a long time. In fact, we can see fights. Over phonics versus version of whole word, a whole language going back all the way to the beginning of public education in this country.
[00:16:25] Emily: There was some wild 19th century, like, I’ve gone back and read some of the things that these people wrote to each other. You could see these things on Twitter or X these days. But do you want me to start talking about some of the basics of what they found?
[00:16:38] Albert: Yeah, yeah. What they exactly. Just give a sense of what those are.
[00:16:41] Emily: Sure. So a lot of people will think that sort of reading is a fight about phonics. And the truth is that it has been a fight about that for a long time. And it turns out that phonics is really important. It’s not the only thing though. It’s really important for everyone to re. That the science of reading does not equal, Oh, kids need phonics instruction.
[00:16:58] Emily: In fact, what my reporting [00:17:00] has revealed is that part of the problem is that schools don’t just need to add some phonics. They need to take away some other strategies that they’ve been teaching kids for how to read the words that tell the kids. That you can sound out the words like you can use some of your phonics skills because many schools have added You know, there were schools that were really against phonics for a long time but in the last 20 years or so the sort of research base around phonics and How important it is and how important it is to learn how to sound out words has become sort of undeniable.
[00:17:33] Emily: So a lot of people have added in a little phonics, but they’ve kept these other things they were doing that were part of the theory or sort of the idea that justified whole language or whole word. So versions of that go back a long time and essentially the two competing camps for a long time before anybody really knew how people learn to read.
[00:17:53] Emily: Was, well, you have to start with the pieces and the sounds, start with the letters and their sounds, teach kids how to [00:18:00] sound out words, blend them together, that’s basically phonics. Versus this other idea, which said, oh, well, that, actually turns out, especially in a language like English, to be kind of hard, that’s actually kind of difficult.
[00:18:10] Emily: Like, maybe that is too difficult for little kids, maybe it’s too tedious, maybe it’s boring. Maybe there’s too much stuff that seems like sort of rote instruction, which we don’t like, that is involved. So let’s do it a different way. Let’s not start with the pieces, let’s start with the whole. Let’s start with whole words, whole sentences, whole paragraphs, whole stories.
[00:18:29] Emily: Let’s start with the meaning of the text, and through kids being motivated and interested in trying to derive meaning from text, they would sort of be able to figure out how to read the words, rather than you have to teach them how to read the words. And it turns out that some kids with very little instruction, Can figure out how to read the words.
[00:18:51] Emily: But what I think is so important for everyone to take away from this conversation is that teaching that sort of whole word or whole language method [00:19:00] creates inequity in our education system. For two reasons. Kids who come to school with a lot of being read to by their parents, being talked to a lot, having parents with a lot of education having lots of books in their home, they are set up very well to not need a whole lot of instruction. Now, some of them still will need a lot of instruction, right? There are these kids who are on that spectrum of having some sort of reading disability and they really rely on that instruction. So, kids from certain kinds of backgrounds just sort of have a better chance of becoming okay.
[00:19:35] Emily: Readers sort of, no matter how their school teaches reading. And then, in many cases, those very same kids who have a lot of advantages in their lives, in terms of their family background, are the very same kids who have the parents who can write the checks that get them the instruction they need if they’re not getting it in school.
[00:19:56] Emily: So, you have this really pernicious kind of inequity built into the system where some kids are more set up to not need a lot of instruction. And if they don’t get the instruction, those very same kids are set up to have the backup plan, which is called parents who. can figure out a way to come up with the sometimes tens of thousands of dollars to figure out a way for their child to be taught how to read.
[00:20:19] Albert: You were mentioning how it’s, you know, 40 years of, reading research. You know, I think of experts like Jeanne S. Chall from Harvard and her protege Sandra Stotsky you know, who helped build Massachusetts curriculum frameworks. you know, they advocated for phonics and, and, and reading classic literature.
[00:20:36] Albert: So, in spite of all that. science of reading. The phrase you were using. So what is it that policymakers and maybe teacher training, you know, schools of education? is it that they missed? Why is there this disconnect between what we know from research and how people practice the teaching of reading?
[00:20:54] Emily: Well, you ask a question with a very complex answer, so I will say that I have now [00:21:00] been reporting on this for close to six years, and I’ve written several articles and podcasts and just did this six episode podcast with two bonus episodes, if people haven’t heard the bonus episodes, and we have new episodes coming in 2024. Great. Yeah. So, it is not an easy, it is not easy to summarize this quickly, but I will give us
[00:21:17] Albert: the, you know, 10,000 foot. 30 000 foot version of that.
[00:21:21] Emily: I mean, I think the truth is that phonics really has been a lightning rod for a lot of people and for a long time. And I think it’s gotten politicized.
[00:21:28] Emily: you know, it has been associated with sort of traditional or conservative or back to the basics. So there was a decent amount of resistance to that in our education system where sort of more progressive, less, focused on explicit instruction really flourished and thrived and I would say thrive today, but really started to flourish and thrive through the sixties and seventies.
[00:21:49] Emily: you know, there’s been this sort of complex stuff around this issue that has made it intractable. but I think one of the things I notice about the basic sort of [00:22:00] explanatory journalism that I have done on this is that when teachers really start to understand the why, why phonics is so important, why it’s not the only thing, why that’s one piece of it, but the critical role it plays in someone becoming a good reader, how a kid becomes a good reader, Once teachers begin to really understand the why, a lot of the ways that they’ve been teaching reading sort of fall apart.
[00:22:26] Emily: And the ways that they’ve been teaching reading, I would say, have been these kinds of shortcuts that they’ve been given. Because, truthfully, they’ve gone into suddenly being a first grade teacher and realizing, like, I don’t know how to teach kids to read. And some of my kids are learning to read, but some of these kids aren’t.
[00:22:43] Emily: And I don’t know what to do about it. And they’ve been given these sort of shorthands, like, well, here are some kinds of books that you can have read. Well, we’ll give them lots of clues in the text, lots of pictures, simple words, where you can have them memorize lots of words, [00:23:00] and you can sort of get these kids in.
[00:23:02] Emily: To text you can teach them to do things like look at the picture, look at the first letter, think of a word that makes sense. These are all strategies that kids can use when they sort of don’t have the phonics knowledge that they really need to sort of laboriously in many cases, like sound out those written words.
[00:23:19] Emily: But it turns out if you look deep into the. Research about this. It is that process of laboriously sounding out written words. Connecting the sound of the word, the pronunciation, the spelling, and the meaning. When you link those three things together, that word can get mapped into, stored in your long term memory.
[00:23:39] Emily: And this really is sort of the key difference between really good readers and not so good readers is good readers have lots and lots of the forms of written words stored in their memory, in fact, tens of thousands of them, which means that when they read, they’re not really exerting a lot of conscious effort on the words themselves.
[00:23:57] Emily: Occasionally you are, you’ll come across a word you don’t see very often, a [00:24:00] word you’ve never seen before, you sort of pause, sound it out, slow it down. in research, they can actually show this literally, like a lot of research has really come from watching in people’s brains and flashing different words in front of their eyes and seeing how quickly they respond to those.
[00:24:14] Emily: Yeah, interesting. Yeah. And the truth is that when you’re a good reader, there are tens of thousands of words that you just know in an instant in like less than a second. And that’s one of the reasons, not the only, but that is one of the reasons you are able to comprehend what you are reading. Because the words aren’t a problem.
[00:24:30] Emily: You’re focusing your attention on understanding what you’re reading. But of course, it’s not only knowing those words, right? You need to know what they mean. There’s a lot of background knowledge. Lots of research that shows us how critical background knowledge is to becoming a good reader. But we have just gotten this early stage of reading so wrong for so long in the United States. It’s not our only problem, but I think we have lots of evidence to show us that it’s a substantial part of it.
[00:25:13] Albert: I want to ask you one more question before I [00:25:00] turn it over to Alisha and just, ask you to offer some commentary on, the fact that you know, what we’re wrestling with as a society now is the impact of the digital age on the minds of young people and adults alike, really. Could you talk about the way in which technology is changing and whether that affects what we’re learning, our attention spans, how we handle More demanding books, ideas, reading in general.
[00:25:24] Emily: I mean, I’m sure you’re asking this question because you’ve noticed a change in your own attention span.
[00:25:27] Albert: Oh yeah. You know, as I now going to be a tune out right now, as I listen to you talk, right?
[00:25:33] Emily: No, I think, I think all of us who are adults have experienced this, it is obvious to all of us that this is a real thing. And we have research that shows that the way we are reading is changing. I would not say that I have become a, an expert on this particular area in any way in my reporting, but I would highly recommend work of Maryanne Wolf. She has written many books. Her most recent one is called Reader Come Home. And it’s all about this. It’s all about the idea of deep reading and [00:26:00] how the digital age is affecting us, how it’s changing our brains. So I think this is critical and definitely a part of what’s going on here. I do sometimes hear people though, say that this is why kids aren’t reading well. And I just need to point back to all the data that shows that was a problem long before we had the internet. So, the internet is affecting this and I think it is affecting all of us. We know we’ve had problems with reading instruction and the basic word reading skills that kids need to have a chance of becoming good readers. We’ve had a problem with that for a really long time.
[00:26:35] Alisha: It’s great to have you on. as we talked over the break, I’m a former legislator and policymaker. And so this conversation about reading, I think is so important and I think it’s great. Maybe we can call it great that, finally in many states across the country, you know, laws are being passed right to change the way we. Deliver reading instruction. And so the timing of this conversation and the work that you’re doing is just very important.
[00:26:59] Alisha: And I’m [00:27:00] kind of fangirling over here. I’m just happy that you’re here and happy be with you today. Thank you. Sure. So I want to jump in and ask about. The central importance of having the academic background, knowledge and reading instruction. So UVA curriculum expert E.D. Hirsch, right, has long been a proponent of this, and especially when it comes to educating low income and minority students. And so would you talk to our listeners about what educators and policymakers alike should know about Hirsch’s work? It’s grounding in cognitive psychology and why it’s not. Been more widely embraced by the education establishment.
[00:27:39] Emily: Well, you also ask a very complex question with a complex answer. I will first say that the work of E. D. Hirsch and many others there are many, many cognitive scientists. Dan Willingham is one at the University of Virginia. He knows E.D. Hirsch very well. And many others who have produced a really robust and interesting body of research about the importance of background knowledge and that reading comprehension ultimately depends on what, you know, and what you already know about a text when you come to it determines a lot about what you’re going to get from it and how well you’re going to comprehend it.
[00:28:13] Emily: And we know that the kinds of tests that we give to kids to assess their reading ability. Are in some ways really knowledge tests in disguise. That’s something that Dan Willingham and I think E.D. Hirsch has said a version of that because you know, there’s a famous example that is given. Maybe this is used too often, but I think it explains it really well.
[00:28:32] Emily: Of a study that was done years ago, where they took a bunch of kids who were good readers and not so good readers. They determined sort of their level of like word reading ability, essentially, and then they gave these kids a text about a baseball game. And the kids who weren’t very good readers, but knew a lot about baseball, did pretty well on that reading test.
[00:28:50] Emily: And the kids who were really good readers, but didn’t know much about baseball, didn’t do so well. So, knowledge really matters. I think one of the reasons that it’s hard [00:29:00] to get to where we need to be in the sort of knowledge conversation, and why E.D. Hirsch can be controversial for some people, is that once we start talking about this, we have to start talking about what knowledge?
[00:29:13] Emily: Whose knowledge? We need to start making decisions. And there is no way that that’s not fraught. There are just, it’s very complicated. There is a lot of knowledge out there. How do you decide this is what you need to know in 4th grade? This is what you need to do in 8th grade? And we have built into our education system And maybe for some good reason things that push against that, like we have fundamentally sort of a local control system.
[00:29:38] Emily: It’s been that way for a long time. It’s actually written into when the federal Department of Education was set up in the late 1970s, and that was a controversial thing because the idea that the federal government was going to have a role in education has really been antithetical to American education in a very deep and profound way.
[00:29:54] Emily: But when the Department of Education was finally set up, there was like language put in there that essentially said [00:30:00] like, the Federal Department of Education cannot tell states and schools sort of what to teach or how to teach it. We need this to be a local decision. Yeah, so this is very, very difficult because obviously it’s very important to make sure that kids have a good broad knowledge and shared knowledge.
[00:30:20] Emily: I think there’s something about shared knowledge is very important for a society and deciding what knowledge kids are going to have and having shared knowledge is actually. Absolutely critical to being able to assess kids reading ability because the example that I just gave so you cannot actually give a third grade reading test to a bunch of kids and have it tell you with a whole lot of precision how well all those kids are reading because it’s also telling you something you don’t know which is how much the kids happen to know about the reading passages that they were asked about.
[00:30:51] Emily: If you had a particular curriculum And you said, here’s the body of knowledge we want fourth graders to know in fourth grade and here’s, teachers are going to teach this and [00:31:00] at the end of the year, we’re going to assess them on that. That reading test would give you a much better measure of how well kids learned that stuff and how well they read, but it is immediately political and immediately difficult.
[00:31:14] Emily: To have this conversation, it
[00:31:16] Alisha: is. And I’m so glad you said that because I also think about cultural competency, right? And how relevant some of the knowledge is right that we want students to have. And that differs, as you mentioned, from state to state community to community. So that’s an excellent point.
[00:31:33] Alisha: Thank you for bringing that up. You also mentioned right when we talk about what we want students to know the topic of common core comes to mind. And so after the implementation of Common Core ELA between 2011 and 2019, and even more dramatically during COVID, more than two thirds of our states, including high performers like Massachusetts and New Hampshire, have really experienced dramatic declines on NAEP reading test scores.[00:32:00]
[00:32:00] Alisha: And so what’s your advice to current state chiefs and education policymakers about how to recover the literacy loss from education reform’s quote unquote lost decade?
[00:32:10] Emily: Yeah, you know, as a journalist, I always feel quite reluctant to make any particular kinds of policy recommendations. That’s really not my role.
[00:32:19] Emily: I feel like my role is to do the reporting, do the explaining, do the investigating So it’s difficult for me to know. I mean, I will say that one of the things I do know from our reporting is that I think the sort of balanced literacy approach to teaching reading really took off over the past 15 years or so.
[00:32:40] Emily: It’s sort of correlated with The launch of common core, but it’s probably more rooted in the demise of reading first. And those things happened around the same time. things in education, it’s things respond to each other, right? Like we have like cause and effect and you can look back in history and my [00:33:00] co reporter and I looked back, you know, made this timeline where we were trying to understand some of the swings and what causes what, and we went all the way back to the 1600s for crying out loud, but after we invested in really working on foundational skills with young kids, we did see an increase in NAEP scores, reading scores. No one can say for sure if that’s. because of that. And we have seen a bit of a decline with a more rapid decline, as you said, over the past few years, which I think has a lot to do with covid on those tests more recently.
[00:33:29] Emily: So, my advice to policymakers is that they, too, should understand some of this science of reading stuff. there are podcasts, there are good books, there are good articles that synthesize a lot of this research. And I think legislators should learn about it, especially those who are taking a lead on legislation related to it in their states.
[00:33:49] Emily: I have to say that there are some legislators I’ve talked to who are very well informed. I’ve also listen to a lot of debate in state legislatures about this issue and cringed at the [00:34:00] lack of sort of level of sophistication when people are talking about this. So I think it’s incumbent on legislators and school leaders and educators and teachers and parents to know something about this because it’s very accessible information now.
[00:34:15] Emily: it wasn’t as accessible even 20 years ago when we were investing a huge amount of taxpayer money in Reading First. And what I’ve heard from a lot of people who were involved in Reading First, the people who were designing it, as well as like the teachers who were involved in it, is that what’s different now is that more people really understand the why.
[00:34:35] Emily: They understand the science on a deeper level. And I think that’s just because the science itself, and particularly the translation of it. Has evolved and we have social media in a way that we didn’t back then and social media is doing a lot of things that are difficult for us to deal with in this society, but I think social media has really helped get a lot of good information out there about the science of reading and so go and seek out that [00:35:00] information.
[00:35:01] Emily: Educate yourself about what this is and what the implications are for education.
[00:35:05] Alisha: I appreciate that. I’m going to push back just on one thing you said. Sure. I appreciate that you are a journalist, and you’ve done this incredible research on this, but I would argue that you are probably one of the best suited to give some policy advice because you’ve done that work.
[00:35:22] Alisha: And as a former legislator, I can tell you that you don’t get a chance to do a lot of the research we should do. But we’re tasked to make these really important policy decisions. And so I would push you just a little bit to consider making some policy recommendations really, because you’ve done the work and you know what it is that we need to do.
[00:35:43] Alisha: And, and arguably when it comes to the science of reading in particular, I think the reason that we’ve not had good policy, is because the research has not been done. So just consider that.
[00:35:53] Emily: I will also say this. think it’s very important for people to recognize that this science of reading really refers.
[00:35:59] Emily: [00:36:00] in many cases to sort of a big body of evidence on the sort of process of reading and how that works and some really good research on implementing that, like translating into practice what we, I don’t know that we really have yet. I think reading first is as close as we came. Was seeing this done at scale, like doing something in a lab or in a classroom or in one school or even in one school district is one thing, doing it in an entire state, doing it in an entire nation that’s as big as ours with as complex an education.
[00:36:34] Emily: I mean, education is a complex system. We’re talking about a lot of people, a lot of entities. It’s just complex stuff. know, We haven’t done it yet at scale, so I’m going to push back on, on your thing, which is, I’m not sure I really know the answer to the policy question. I don’t know, you know, I’m really interested to look and see what happens over the next few years.
[00:36:54] Emily: A lot of policies have been passed over the past few years. I think policy can play a really [00:37:00] important role. Policy is also sort of like a blunt force instrument, you know, and it can have a lot of unintended consequences. It can create a lot of resistance. I think the jury’s still out on sort of what the best policies.
[00:37:14] Emily: I just don’t know if I know the answer to that question. And again, as a journalist, I really believe in knowledge. So I would say, I put together a reading list on the science of reading, and it’s on our website, soldastory.org. And I would tell every legislator and their staffers, because as you know, their staffers do a lot of this work and do the prepping for them, to go check out that reading list.
[00:37:32] Emily: Yes, agreed. And we will have more Sold A Story coming, by the way, about this question of where are things working? Where are things not? How do you translate this stuff into practice? There’s a whole body of research on translational science. Translating this stuff, in education in particular, into practice, and I’d like to really look more at that.
[00:37:53] Alisha: Understood. And I would say we’d be remiss if we did not mention the Mississippi Miracle, right? And the work that happened in [00:38:00] Mississippi and still going on, and I think a good example. Okay, I’m going to move on because I have a couple more questions for you. Okay. Increasingly, and we talked about this.
[00:38:09] Alisha: You talked about this a few minutes ago with Albert, but I want to ask a different question when we talk about education policy discussions that include neuroscience research and anecdotes about the wide, often negative impact of smartphone screens and multimedia on the brains. And learning of young people.
[00:38:27] Alisha: Can you talk about what the current brain science is telling us about the differences between acquiring literacy and knowledge through printed or written word and digitally and how educators and parents should be thinking about carefully and constructively using technology in schools and at home?
[00:38:45] Emily: Yeah. Yeah. You know, like I said, honestly, I, I cannot say that I am an expert. There are many more people who know much more about this and specifically on your question on sort of the research about the differences between reading in different forms. Again, that’s a really [00:39:00] important question.
[00:39:01] Emily: You know, I think one of the things we have to realize as with so many things in our life, like the, cat is out of the bag when it comes to technology and screens and cell phones and We have to sort of learn to live with them in some way, although you can see that there are examples of schools and districts that are trying to do things like ban cell phones, you know, and that’s an interesting thing to watch.
[00:39:23] Emily: You know, I think that there was a lot of enthusiasm about bringing technology into our classrooms, and I think a lot of people are rethinking that, like whether or not that was really the best idea, whether we need to have a little bit school be a little bit more of a technology low or technology free kind of environment.
[00:39:40] Emily: I know anecdotally, and I’ve read this in some pieces that there are like, you know, big people in tech who send their kids to schools where there isn’t any technology and don’t want their kids to have a cell phone, you know, and a lot of this is going to come down to parents that decisions that parents make.
[00:39:56] Emily: I mean, I have sons who are in their early twenties and I already talked [00:40:00] to them about someday when you have children. Don’t put a phone in that little baby’s hand, you know, like I definitely have that feeling. I, I see people in my neighborhood walking around just staring at their phone instead of staring into their baby’s eyes, you know, and I don’t want to be doom and gloom.
[00:40:14] Emily: Like I think there’s many ways that technology has and can help and support education. So it’s just complex stuff. And I’m not trying to avoid your question, except that I just don’t really have a good answer for you, but it’s a really good question. Yeah,
[00:40:29] Alisha: understood. And I think you pointed out some great resources that we should look into and just bring up the point about, you know, the impact of technology.
[00:40:36] Alisha: And I think we have to embrace it and use it in a way that really helps drive learning. But we also have to understand, the research behind it, right, and how it does have some negative impact. So I appreciate that. so my final question and I’ll ask this personally as a parent my husband, I have three school age children at home and we all often are talking about what does it mean to be a good [00:41:00] reader you talk about the different kinds of reading that you think young people should be doing.
[00:41:05] Alisha: We talk about high quality fables, poems, myths, fiction, novels, history, and biography that. Really help them give the language, the vocabulary and the knowledge that they need to become quote, unquote, good readers.
[00:41:19] Emily: Yeah. Well, I mean, it’s pretty clear that wide reading is really important, right? Like I talked before with Albert about, you know, the background knowledge, right?
[00:41:28] Emily: So how are you going to get wide, deep background knowledge? Well, you’re going to read a lot of different kinds of things. You know, at the same time, I think there’s a lot of parents who. you want to get your kids reading and if you can find things that they really want to read and really like to read, then that’s great.
[00:41:44] Emily: So if they want to read a whole bunch of. books about spaceships or books about the, you know, 19th century warfare or I have boys. So there you go, then, you know, let them. So I don’t know. I guess the only way I can answer that is just to say [00:42:00] that. Going back to the fact that it’s difficult for schools to decide what knowledge they want kids to have.
[00:42:07] Emily: I do think obviously where kids can be gaining lots of knowledge and where kids do gain lots of knowledge and why we do see such a strong association between Test scores and family educational background because kids are acquiring a lot of what they know outside of school and that’s always going to be the case.
[00:42:26] Emily: You just think about in terms of the time kids are in school and the time that they’re out of school. They’re, in school for a lot of time, but they’re out of school for a lot of time, and they’re just acquiring a lot of the knowledge through school. The stuff they get exposed to at home and in their communities and through conversations with their parents and their parents, friends and their peers.
[00:42:42] Emily: And, you know, at the end of the day, it is just such an advantage, the wider and the deeper your knowledge, the better. So as a parent, whatever you can do to encourage that kind of depth and breadth I think it’s going to benefit your kid in so many ways. Makes a lot of sense.
[00:42:57] Alisha: Thank you, Emily, so much for [00:43:00] being with us.
[00:43:01] Emily: You’re welcome. It was great to be here.
[00:43:24] Albert: and I’ll add my Thanks to you, Emily, for being on the show. It’s really great to hear what you’ve uncovered over the past several years. And Alisha, I also want to thank you for co-hosting. It’s great to be on
[00:43:33] Alisha: with you. Thank you. Great to be on with you too.
[00:43:36] Albert: Great conversation today. Yeah. And so before we wrap up, our tweet of the week comes from EducationNext driving across tracks of new home development in El Paso, Texas, one can’t miss the signs of charter school momentum. And actually, you know, this reminds me of the news article that you just discussed at the beginning of the show, Alisha. Really, I actually encourage all listeners to look at that piece. it’s a fascinating piece [00:44:00] just documenting some of the history in the, charter school movement in Texas since its beginning and what’s going on now, just the things that are going on in the political economy just what’s in the ecosystem there.
Albert: So, read up on it and kind of get the scoop of what’s going on in Texas. You can access that link online and that’s it for today, but tune in with us next week as we have Professor Carol Zaleski who’s a professor of world religions at Smith College. She’s going to be joining us to talk about J.R.R. Tolkien and C. S. Lewis. She is the co-author of the book, The Fellowship, Literary Lives of the Inklings. And so, should be a fascinating discussion be sure to tune in with us next week. Until then have a great one and I’ll see you next time.
This week on The Learning Curve, guest co-hosts Prof. Albert Cheng of the University of Arkansas and Alisha Searcy interview journalist Emily Hanford, host of the hit podcast Sold a Story: How Teaching Kids to Read Went So Wrong. Ms. Hanford discusses how she became interested in the science of reading, the growing consensus around phonics as the best way to teach children to read, the impact of the digital age on learning, and the importance of academic background knowledge for schoolchildren’s learning. She offers her thoughts on how to reverse dramatic declines in NAEP reading test scores and the different kinds of reading that young people should be doing, including fables, poems, myths, fiction, history, and biography, that give them the wider vocabulary and knowledge to be good readers.
Stories of the Week: Albert discussed a story from Axios about U.S. students’ math scores plunging in the PISA global education assessment; Alisha commented on a story in USA Today about how, despite the ongoing growth of private, charter, and homeschooling during the COVID-19 pandemic, most U.S. students continue to attend a traditional district public school.
Guest:
SCOTUS Wealth Tax: Are Appreciated Assets Income?
/in Featured, News, Podcast Hubwonk /by Editorial StaffClick here to read a transcript
Transcript: SCOTUS Wealth Tax: Are Appreciated Assets Income?
Hubwonk Episode 181 December 12, 2023
This is Hubwonk. I’m Joe Selvaggi. Welcome to Hubwonk, a podcast of Pioneer Institute, a think tank in Boston. For most of the history of the United States, a federal income tax was deemed unconstitutional. But the ratification of the 16th Amendment in 1913 erased that constraint with a single sentence: “The Congress shall have the 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.” Since 1913, taxable income has been understood to be money that is either earned through a paycheck or from profit earned from the sale of an asset. But the U.S. government is challenging that interpretation of income, taking its case, Moore v. U.S.A., to the Supreme Court. In oral arguments heard last week, the U.S. Solicitor General asserted that taxable income may also be levied on the increase on the value of an asset, regardless of whether the owner realizes any of the income from that asset. While the details of this case involve unusual tax provisions on American ownership in foreign companies, the principle at stake is whether income must be realized in order to be taxable. Such a shift in definition could redefine all appreciation assets as taxable income, inviting investors to face a tax bill long before a single cent of income is ever received. Could an adverse decision in the Moore v. U.S.A. case usher in a new regime of taxing appreciated investment, including assets such as a house, in the same way as realized income? My guest today is Tommy Berry, editor-in-chief of the Cato Institute Supreme Court Review, who co-authored an amicus brief in the recently argued Moore v. U.S.A. case. Barry has examined the legal precedence and constitutional history of the U.S. federal income tax and has written extensively on the constraints the Constitution imposes on congressional prerogatives. Attorney Barry will share with us his views on the facts in the Moore v. U.S.A. case, the insight the oral arguments offer on the nine justices’ view on tax law, and the possible effects on American investors if the highest court redefines asset appreciation as income. When I return, I’ll be joined by constitutional scholar, Attorney Tommy Berry.
Okay, we’re back. This is Hubwonk. I’m Joe Selvaggi. I’m now pleased to be joined by Hubwonk listener favorite and editor-in-chief of the Cato Institute Supreme Court Review, Attorney Tommy Berry. Welcome back to Hubwonk, Tommy.
Tommy Barry: Thanks for having me.
Joe: All right. Before we, I’m going to surprise you with this remark — before we dive into our topic today, which is going to be about taxes and the Supreme Court’s ruling about taxes I want to congratulate you on your recent induction into the esteem ranks of the lawyers of the Supreme Court I’m not sure what the title is, but before we get started share with our listeners what happened and how you were fortunate enough to be among the elite attorneys who can stand there before the Supreme Court.
Tommy: Oh well, you’re overselling it a bit, but I appreciate it. Thank you. It requires the arduous task of having been a lawyer for three years, having $200 and having two current members of the Supreme Court bar who are willing to vouch for my character. So that was and filling out many, many forms. And then when you do all that, you get an invitation to come to the Supreme Court and be sworn in in person, which I wanted to do. I was eligible during COVID, but you know, getting sworn in just through me. a piece of paper isn’t as exciting. So, I held out for when they started doing it in person again. And just so happened to luck out that the data I was assigned was a pretty big oral argument, a case called Rahimi about the Second Amendment. And what’s really cool is on the day you get sworn in, you get absolute front row seats. I was literally sitting two feet behind council table at the front of the Supreme Court, and my boss and mentor Clark Neily at Cato Institute gets to go up to the lectern and personally ask the Chief Justice to admit me to the court, and the Chief Justice makes eye contact with me and says, “Mr. Barry, your motion is admitted.” So, I definitely recommend it, and even if you’re never going to argue at the Supreme Court, which I certainly won’t, I don’t think — it’s an experience worth doing.
Joe: Wonderful. Yes, we’ve had our Clark Neily on the show to talk about Rahimi, so great. You’ve got an exciting front row seat to a very exciting case that we’ve talked about on the podcast as well. So, we’re going to be talking about a different case today, one called Moore v. U.S.A. which recently or earlier this week we heard oral arguments. Familiar phase again from Rahimi there was the solicitor general Elizabeth Prelogar, who’s becoming quickly infamous in her skill as arguing on behalf of the U.S. But anyway, we want to talk about the facts. Let’s start just basically at a very high level just to pique our listeners’ interests. What were the basic contours of the case? You’ve been part of an amicus brief for this case. What were the facts in this case at a very high level?
Tommy: Sure. So, this goes back to a political compromise in 2017, shortly after President Trump took office, you know, one of his first big legislative accomplishments was the Tax Cuts and Jobs Act. It cut taxes in a lot of areas. It reshaped the way that foreign taxes on foreign corporations that U.S. shareholders may own part of — it kind of changed the way that system worked. There was concern mostly on the Democratic side of the aisle that it might cause too much of a short haul in tax revenue, especially in the U.S., especially in the United States. the short term. So as a compromise, they invented a one-time only very unusual tax that they called the mandatory repatriation tax (MRT). And it kind of invented a legal fiction that said for one time only for 2017 tax year and only 2017 tax year, we’re going to tax certain shareholders who own at least 10% of foreign corporations as if they had been receiving dividends for the whole length of time that they’ve owned these corporations going back years or even decades. So, it sort of looks at what was the earnings of that corporation during whatever time that they held that shares in that corporation and treated it as if they had made a profit off of it, even if in fact they had not, which is why I call it a legal fiction. And unusually, it didn’t look at just one year, it went back for however long that they held ownership stake.
Joe: Okay, so we’ve got some facts in the case. We have a couple. I’ll just introduce some sort of more specifics. I think they invested about $40,000 in a firm that’s in India. I think they co-invested with a friend. They own about 13%, which clears that 10% or more share. As you mentioned, it’s a 2017 Tax Cuts and Jobs Act, and they sort of got swept up in this so-called mandatory repatriation tax, but they had never actually received the penny from this company. They just essentially, notionally, their value in the firm had increased. I don’t have that number in front of me. But effectively, this is a tax, in this case, on the notional increase in their value of their assets, not actual income that they’ve received. So, we’re going be talking a lot about income, what that means, about how it is that the government is able to tax us, the federal government is able to tax us. So, let’s get a little history lesson here before again, we dive into the facts more deeply in this case. How is it that the U.S., the federal government can tax our income? Again, I think our listeners might be surprised to learn that for the vast majority of our country’s history, we didn’t have a federal income tax. Where does that come from? And how is that constitutional?
Tommy: That’s right. So, during the Constitutional Convention, there were many compromises as a anyone with some knowledge of that history knows many of the compromises were about big states versus small states. One of the fights was about, you know, the Congress, the House and Senate — should one represent larger states more? The smaller states didn’t really like that there was a U.S. House where the big states would have more representation. So, they got a concession that kind of what the Framers thought was a clever, a clever sort of two sides of the coin compromise, which was that not only would larger states have more members of the House of Representatives, they would also have to pay more in so-called direct taxes. Now they didn’t define what that term was, but essentially they said whatever a direct tax is, that that would be apportioned among the states based on population, the same population formula that’s used to allocate representatives. So, if at the time Virginia was three times as populous as Rhode Island, you would have to take three times as many direct taxes from Virginia as Rhode Island. Now what might immediately become apparent there is that that makes no reference to the incomes of the various states, and not every state has the same level average level of income. Some states have much higher per capita income than others do. So, it quickly became apparent that if an income tax is a direct tax, it wasn’t going to be feasible to impose an income tax on the basis of income across the states. So, to use a modern-day example, I think Massachusetts has the highest per capita income. I think Mississippi might have the lowest, but if they have roughly equal populations, you would have to, under this original rule, take the same amount roughly based on their populations from those two states with no regard to the fact that people are making way more money in Massachusetts. So, the federal government tried to impose an income tax. They argued that it’s not a direct tax, but the Supreme Court in a case called Pollock in the early 20th century said, “No, this is a direct tax. You do have to apportion it, and therefore we’re striking it down.”
And at that point, it became apparent that the only way to impose an income tax would be to pass a constitutional amendment that exempts income taxes from this apportionment requirement. The apportionment requirement effectively made it infeasible to impose a federal income tax. And that’s exactly what happened. The 16th Amendment, as a direct response to Pollock, was proposed, was enacted and ratified, and it exempts income taxes from the apportionment requirement. And ever since then, we’ve had a federal income tax for that reason.
Joe: Okay, so I think I’m keeping up. We wouldn’t want Mississippi and Massachusetts to pay the same tax per capita because, presumably, we’d be severely regressive, meaning the poorer state, the harder that tax would hit each individual member of that state. So, until the 16th Amendment, that was 1913, I believe, effectively, it was untenable. You couldn’t do it. All right, so now here we are, 1913. We do now have the 16th Amendment. It’s ratified. But the definition of income, when we’re talking about federal government, because it’s been carved out as a special category, has to be defined itself, all right? What does income mean when we’re talking about it as a special case in the 16th Amendment? Does it, you know, what does that word mean? Because I think it’s going to speak to what we talk about in the Moore case.
Tommy: Exactly, and the Supreme Court has sort of created a definition through case law, through a series of cases where the government has tried to push the envelope of the bounds of income, and the Supreme Court has a few times struck it down and pushed it down. back and said, no, that doesn’t qualify as income. So, the key seminal case is an early case called McComber v. Eisner. This is one where the federal government tried to impose taxes on essentially what would be called today a stock split. This is where you might own, you know, there might be a million shares out of a stock and each share is worth $50. They instituted a split. Now there are two million shares, but each is only worth $25. So, no one really owns anything more, really. The number of their shares, they own doubles, but the value of each share is cut in half. But the federal government tried to nonetheless impose a tax when that happens, basically tax everyone who owns stocks when a stock split occurs. And the argument the government made is, yes, okay, they aren’t really gaining anything more in terms of the value of this stock from the split self, but it’s a proxy or it’s a sign that there has likely been growth in the company they own. Stock splits usually happen once a company’s overall value has grown so much that the value of each individual stock has roughly doubled and then they do a split to kind of bring it back down to where it was. So, they said treating this as a proxy were allowed to tax stock splits because it’s a proxy for people who owning shares in companies that have grown a lot. And the Supreme Court said, even if that’s true, even if this is a proxy, and even if everyone’s subject to this does own shares that have grown a lot, that’s still not realizing income. Because until they get paid a dividend, or until they sell it for a capital gain, they haven’t had any sort of benefit from this doubling. I mean, think about it. It could be that the company goes bankrupt the next day, and then the shares they own go to zero. So, these are potential capital gains, but not yet realized capital gains and the Supreme Court struck down that tax. So that’s really the foundational precedent that says you can’t use things as proxies or you can’t just treat wealth appreciation as if it’s income.
Joe: Okay. All right, so the bright line there is, again, though the government has tried creative ways to access money that has yet to be received, the real bright line seems to be that though your asset may have appreciated either through proxy or some notional, let’s say stock market spot price or something, it’s not your money, it’s not income, it’s not taxable until you either receive it or get control of it. Is that roughly the line?
Tommy: Yeah, that’s exactly it.
Joe: Okay, all right. So now we come to the Moores, which is it sounds like a pretty similar case, whereby they have an asset, it’s in a foreign country company, and it’s gone up in value. But yet, they haven’t received this money. Now, I want to put a pin in this idea that often companies will retain earnings or not distribute their profits or their earnings and choose to do other things with it. But this company did produce a profit that they retain. In other words, they reinvested it. It sounded like a very good company that had helped small businesses in India. But rather than distribute it to the Moores, they kept it the value of that firm, presumably because of the growth of the retained profits grew, the Moores didn’t see a penny. How is it that there’s any claim to the increase in the asset as defined as income?
Tommy: So, I would say that there are two — there’s one precedent and there’s one other aspect of the tax code — which the Ninth Circuit, at least, relied on heavily to say it’s okay to treat this as an income tax. So, the precedent is called Helvering v. Horst, and that was one where, roughly speaking, a father bought a certain instrument like a bond, gave it to his son as the gift. Eventually, that came due, the son received money from it. And the question was whether the income tax could be then imposed on the father, rather than the son. And the Supreme Court said, “Yes, it can be. You don’t have to literally receive cash money to necessarily realize income. You can have other types of benefits, such as the benefit of knowing that your gift has essentially accrued, that the person you wanted to give the money to has now received their money.” So essentially, when someone gives a gift, you can tax the person who gave the gift rather than the person who received the gift. But still, so the question and what some people have interpreted that case to mean is you don’t have to realize income at all to be taxed.
That’s what the Ninth Circuit said when the Moores challenged this case and challenged this tax, and the Ninth Circuit rejected it. But the alternate reading that I think is correct is that the Supreme Court was simply saying realizing can have broad meanings — that it refers to some sort of benefit, but it doesn’t have to be literal monetary benefit. It can be an emotional benefit or some gaining of control or something like that. So that’s what makes it a little bit more difficult sometimes to draw that line of what’s realization, given that it’s more than just taking in money. If it were just taking in money, it would be a very easy line to draw.
And then the second precedent, not a judicial precedent, but a practical precedent is the so-called Subpart F of the tax code. And the MRT in some case sense was based on subpart F, but it expanded it in an important way. So, Subpart F similarly taxed people on mere ownership in foreign corporations, even if they didn’t distribute dividends, but importantly, it was only based on one year at a time. And so, it was more plausible to say, as somewhat of a legal fiction,
that ownership in that particular year of a stock of a company that was expanding was likely to go along with certain increases in ability to control that company or ability to take advantage of that increase in the value of the company in some way. What the MRT crossed the line that none had crossed before was treating accumulated increase in value back years or decades as a legal fiction, as income. But the Ninth Circuit essentially didn’t see a real distinction between Subpart F and the MRT. So, it said assuming Subpart F is constitutional, which the Supreme Court has never upheld it, but it’s been on the books for 60 years — assuming that’s constitutional, they said we have to uphold the MRT. They said otherwise, if we strike down the MRT, the 60-year-old law is going to have to be struck down too, and we don’t want to rock the boat.
Joe: Yeah, it seemed to me, and again, we’re going to talk about that now, the oral arguments, it seemed both sides were worried that, regardless of which way this goes, it’s going to disrupt the past or the status quo, right? That the status quo is at risk, either way that the Supreme Court argues. or decides. So, let’s get to the actual oral arguments. Again, I mentioned earlier, it was what I think it’s soon to be becoming a legend, Elizabeth Prelogar, who argued for the U.S. What was the crux of the U.S. argument here, given the precedence you described? What was sort of the essence of her argument saying, look, the Moores owe this tax?
Tommy: I think she was very smart to back away somewhat from the more extreme position that the Ninth Circuit took. So, when the Ninth Circuit upheld it, they essentially said there’s no realization requirement and Congress, the 16th Amendment, allows Congress to define income however it wants. In other words, we as courts just need to back off and not draw any line. Prelogar, I think very smartly, realized that the Supreme Court isn’t going have an appetite for that, but that that was essentially make the 16th Amendment a dead letter if there’s no judicial enforcement of it whatsoever. So, she’s somewhat hedged on whether this is realization or not, but she left the door open and I think she probably thinks this is the more likely winning argument to say this was in fact realization, just under a broader interpretation of what realization means — that if you look at precedents, or at least practices like Subpart F, this isn’t really that different from it and you can at least make some sort of stretch of a case but still a case that ownership in something that has appreciated gives you certain benefits that you can take advantage of that perhaps ownership of some of stock that has appreciated could give you more leverage in negotiations or things like that. So, in other words I think she was arguing for a very broad interpretation of realization, but still keeping realization there as some line that the government can’t cross so that the Supreme Court feels like it’s at least not, you know, opening the door to anything and everything.
Joe: Well, I think in listening, again, I’m the layperson, you’re the expert. I just listened, I didn’t actually, I wasn’t in the room, but it seemed like it was a colorful debate as to sort of everybody seems to be an originalist now and they’re trying to debate whether income — the word realized was left out of the 16th Amendment — and there’s sort of a debate whether that was deliberately left out, meaning it didn’t have to be realized, didn’t have to be accepted. And others saying income, you know, the definition of income, saying realized income is almost redundant. No, income is an income realized. Well, say more about this debate and whether you think it’s subsequently matters.
Tommy: I think it does matter. I mean, it is tricky because the 16th Amendment is pretty spare. I do think that the Moores, the challengers, had some convincing arguments from things like dictionaries at the time, and it often was in reference to realization. And I think you could just ask sort of what’s the alternative? What’s the line besides income that’s meaningful, but that goes beyond realization, especially if realization is defined broadly? I thought the arguments were somewhat frustrating, in that there was a lot of sort of amorphousness between, are we arguing for a very broad definition of realization, or are we arguing that realization isn’t aligned and that you can somewhat go past it. But either way, it sort of comes out the same way in that I felt like the government was saying, either way, it’s a very wide latitude, but it’s not an infinite latitude. Importantly, you know, saying, you don’t have to worry about your opening the door to a future wealth tax or a future property tax on every house anyone owns.
Joe: Well, again, then the oral argument went into these sort of scenarios, which I was very sympathetic to these arguments, which say, OK, if we sort of either throw out or define broadly realized, or say that it’s almost superfluous, you know, I don’t know how that would work. in that we all, well, perhaps not all, but we all make money from income, and we all make money from investments or the appreciation of our investments, our house or something like that. You know, broadly speaking, we don’t pay income or capital gains tax until we earn the money, or we sell the asset. You know, I think our listeners will relate to the fact they may own a house, they may have bought it for a million bucks, 10 years later, they sell for two million bucks. They know they’re not paying, you know, $100 ,000 worth of appreciation tax every year. They essentially don’t pay that till they sell the house. If the Moores — or this case is ruled in the way the justices seem sympathetic to — wouldn’t this open the door to taxes on notional income that isn’t realized is just the appreciation of an asset?
Tommy: That’s definitely the concern. And one thing to stress is that there’s a difference here between federal versus state or even local. And we do sometimes see especially local, you know, property taxes at the local level going to pay for public schools and things like that. But it’s always been an important distinction that those are set by governments at the local or state level, which are more connected to each individual taxpayer. So, you don’t have the concern of the national government imposing taxes on a bunch of rich people in one state because voters in some other states wanted to do that. So, to the extent that we have property taxes currently, they’re a little more democratically justified, or there’s that protection of only being at the local level. So, it would be an entire sea change to if we suddenly had the equivalent property taxes like the kind you pay for public schools now being imposed by the federal Congress nationwide. I do think the Supreme Court is concerned about that, and they seemed like they were looking for the Solicitor General give them some kind of line to reassure themselves that they’re not opening to the door to that, which is why I lean towards the view that they’re not — even if they do uphold this law, which perhaps they’re leaning towards — they want if they seemed like they were looking for some way to uphold it while keeping that realization argument and saying this was in some way realized even if you kind of have to squint a little bit to see it.
Joe: Well, that’s a bit reassuring. Again, I like to ask these questions because as I’ve started to study the Supreme Court a little more, I realized it’s not just nine faces. Each justice sees the world very, very differently and the law very, very differently. Did you see in these back and forth of the oral arguments any clear divide between sympathies, you know, through what we traditionally think of as left and right, you know, Republican appointed justices versus Democrat, I think, I don’t know who you would consider farthest right, maybe Thomas or Alito and farthest left, certainly Sotomayor, were the nature of their questions, informed and be sympathetic to one side or the other.
Tommy: Certainly, Justice Kagan and Sotomayor were particularly concerned about striking down a lot of previous precedents and striking down the notion of what Subpart F have to fall and things like that. And Justice Kagan, there was one amusing moment. Justice Kagan is the only former Solicitor General herself currently on the Supreme Court. And she came to the defense of the current Solicitor General at one point when some of the more conservative justices were pushing her on the fact that she refused to explicitly kind of disavow the constitutionality of anything in the future. Justice Kagan said, well, isn’t it literally your job to potentially defend whatever the government does in the future? So, we can’t really hold that against you because you would have to come back and defend any law that was passed in the future. So, in other words, Justice Kagan making the point that is correct that ultimately the court has. has to bear the responsibility to draw those lines. You can’t ask — you can’t expect the government’s lawyer to draw concessions about what the government can’t do in the future. Among the more right-leaning justices, there was definitely a split with a few, Justice Alito especially, were extremely skeptical and focused on the potential negative effects of opening the door to taxes on unrealized income. I felt that others like Justice Gorsuch were really looking for some kind of compromise. And Justice Gorsuch even suggested, well, given that the Ninth Circuit didn’t treat this as realization, could we even send it back? Could we remand it? Could we say you do require realization, but since it wasn’t really briefed focusing on that as much, do we send it back for the Ninth Circuit to decide whether, in fact, there was realization here after we tell them that you need to find that to uphold the law. So, a lot of justices put very different possible outcomes on the table.
Joe: For me listening again as a layperson, it seemed to me that justices or maybe the argument or the whole aura of the thing, I mean, I don’t think people sort of understand the notion of either retain profits or earnings that, you know, I would use an example very simple example —you know if I have a stock that’s worth a hundred dollars and that share earns ten dollars that year, the company has a choice it can distribute it as a as a dividend and then I get it and I spend I get income tax or they retain it and build a new factory with it, right and then in theory my share instead of a worth a hundred now It’s worth a hundred and ten dollars and someday the government will get its money. When I sell that share, but ultimately though my share has gone more valuable, I don’t pay any tax. That’s kind of how it works, right? And that’s how it’s supposed to work. Do you see, like, there seem to be nobody sort of grasping the idea that there’s a value in leaving these earnings or profits in the hands of those creating the profits so as to, you know, say, compound those profits. Did you see any tension there that seemed an uninformed viewer or entirely legalistic rather than, frankly, an accounting question?
Tommy: Right. Well, this can be obviously one of the frustrations of legal cases and legal argumentation is that sometimes you do kind of focus down on the trees of the legal question and miss the forest of, you know, would this be good policy or not? Now, you know, the Supreme Court to its credit knows to somewhat stay in its lane, and it’s laying really is just a legal question, the constitutional question. But I do think you’re absolutely right that as we’re discussing this case, we certainly shouldn’t lose sight of the policy issues, the problems as a policy matter that come from jumping into that process early, you know, taxing people before they’ve actually realized anything from it. I think the Supreme Court, you know, they will often be self-deprecating when any case comes up about how they’re not subject-matter experts, whether it’s tech, whether it’s business, and so on. And that’s true here. So, to some extent, it may be a bit disappointing, but it’s not surprising that they mostly stuck in their line, lean to history of the 16th Amendment, the language, and the precedents they have to work with and so forth.
Joe: Again, soapbox alert here, I think I worry that if we start taxing a notional increase in value, A, it’s very hard to assess. right? Like a wealth tax, how much is your house really worth? You don’t know until you actually sell it or your company that, yeah, we can guess, and that’s why we have a stock market, but just as the stock market fluctuates moment to moment, the actual value of a company doesn’t, you know, it’s just, you know, it’s imagined until it’s ultimately sold. Do you see sort of, you know, investors shaking in their boots or you’re like what possible response, you know, would it be a legislative response? What kind of bulwark would we have against let’s say, suddenly saying to the government, sure, you know, if you think that person’s wealthier, I think that the term to use from point A to point B or a moment in time to a moment in time, defining income as the difference between what you were worth yesterday and another day, that delta, both in income and value of your assets is actual income. That’s to me like made the hair on the back of my neck stand up What do you think about that?
Tommy: Well, that’s the concern is that if the Supreme Court opens the door then the only veto gate left is Congress and the president now. Obviously, you would still have to pass the Supreme Court saying it’s hypothetically constitutional to do X doesn’t mean X is immediately enacted You still need to get it passed through the House and the Senate and signed by the president president. But that’s still, you know, you can never predict which way the political winds are going to blow, and things get lots of popular attention, especially more populist policies. You can see a lot of popularity kind of snowball for it faster than you might think. So, it certainly is concerning. Now, I think you can still make a lot of good policy arguments as you’re pointing out to oppose that in the future. But certainly from a legal perspective, you’d much prefer that the court draws the line now and I think one point about this case is it’s I think it’s actually good that this is a rather obscure law that they’re deciding this issue under, because there would be a lot more political heat and that might be sort of obscuring things if this were happening over say a President Elizabeth Warren signed wealth tax 20 years from now then you know every every partisan in the country is going to be fighting about it, and there might be more heat than light. Here at least we kind of have a little niche thing that most people didn’t even notice in the Trump tax cuts. And so, we can be a bit more legalistic and go back to first principles without it kind of devolving into intense, you know, partisan fighting, like in say the Obamacare case.
Joe: Okay, so let’s spell it out we can, win, lose, or draw, you can’t know. I guess this case will be handed down in the spring. You can’t know how they’ll rule. I think it’s a coin toss listening to the questions and trying to guess how they’ll rule. I think what you suggested — and I think what even Solicitor General Prelogar reassured the court — that this ruling would be very narrow. It wouldn’t be broad sweeping, it would be just the facts in this case, which maybe makes it less useful. But let’s play it out. What’s the worst case for the Moores? What’s the worst case for the U.S.? And what’s the narrowest definition that could just in a sense leave us where we started?
Tommy: Yeah. Well, worst case for the Moores is that they fully adopt the Ninth Circuit approach. So, the Ninth Circuit said no realization whatsoever. It’s up to Congress. In other words, the 16th Amendment almost in my view becomes an inkblot for Congress to fill in the gaps, and it’s just a political question — that in other words, as long as Congress wants to say it’s income, that’s when it’s income. I don’t think the Supreme Court will do that, but we saw the Ninth Circuit do that. So, it’s not entirely out of the question. So that would be the worst-case scenario for the Moors. Worst case scenario for the U.S. is that they do reach beyond just this tax, and they say, you know what, we’ve never looked at Subpart F, the tax dimension that’s been on the books for 60 years, but that doesn’t really make a lot of sense either. And they say, you know, we’re going to set down a rule that any appreciation in tax held can’t be treated as income. And if that means that a likely challenge to Subpart F in the future would succeed as well, fine, that’s the line we’re drawing. I don’t think they’ll go to either of those extremes, but those are both potentially on the table. What I think that they will do is — what I think they want to do, as you said, is rock the boat as little as possible — have some ruling that doesn’t affect any taxes currently on the books, except maybe this one, but also that doesn’t necessarily open the door for any future taxes that would push the envelope further besides this one. So, in other words, they want to either strike down or uphold this tax without really affecting the people who have said or thrown out numbers like you’d lose a trillion dollars in revenue if other taxes like this were struck down. And I think that’s made them a bit nervous.
Joe: Or on the flip side, realize trillions of dollars in new revenue if it’s broadly interpreted in favor of U.S.A. So, lots at stake. So, we’re getting close to the end of our time together. I hope we’ve piqued the interest of our listeners, both, let’s say, the accountants among us, tax accountants, attorneys, but also just ordinary citizens thinking, can the government go after my investments? And ultimately, I think this reflects a bigger disfavor for investment, earned so-called unearned income or money made from other money. Yeah. I’ll get on my soapbox and say look I think an income from hard work is virtuous, but we ultimately invest it’s money that we’ve already earned it’s already been taxed we can either spend it or invest it and if you take away that investment incentive we might as well just go out and you know blow it you know you investment money is the money that you risk in order to you know make more money You might lose it, or you might get more money. I don’t know why that’s fallen so out of favor, you know, but it has. So, this, I think this case definitely stokes those flames of people who perceive, let’s say, a sort of a Marxist theory of value, the labor theory of value, which is money for money, money on money, is sort of ill-gotten somehow. But I’d say the difference between the U.S. and our prosperity and either you believe the U.S. works harder or you think investments make us wealthier. Pick your adventure. All right, so we’ve run out of time. Where can our listeners who are now excited about this case learn more about your reading, your writing, your amicus brief and ultimately your views on the likely outcome of this case?
Tommy: Absolutely. Absolutely, so you can go to my page and see all my writings at the Cato website. So, I’m at cato.org/people/Thomas-Berry. You can also, once you go there, you can search for Moore and it’ll pop up pretty quickly. If you want to go to our amicus brief specifically, it’s at cato.org /legal-briefs/moore-v-united-states-one.
So probably just, probably just Googling Cato Moore v. United States would be faster. But either way, yeah, would love for people to go there. You can read kind of a 500-word summary of it at that page and then you can click on the PDF if you want to read the whole brief.
Joe: Wonderful, yeah. And of course, you’re very avid tweeter on these topics. So, you keep us all sort of abreast of what’s going on while we sleep. So thank you for joining me again on Hubwonk, Tommy, you always, always a great asset. and you make some dry topics come to life. You really are great at explaining complex issues to late people like me. Thank you for your time.
Tommy: Thank you very much, happy to.
Joe: This has been another episode of Hubwonk. If you enjoyed today’s show, there are several ways to support Hubwonk and Pioneer Institute. It would be easier for you and better for us if you subscribe to Hubwonk on your iTunes Podcatcher. It would make it easier for others to find Hubwonk if you offer a five-star rating or a favorable review. And of course, we’re very grateful if you share Hubwonk with friends. If you have ideas or comments or suggestions for me about future Hubwonk episode topics, you’re welcome to email me at hubwonk@pioneerinstitute.org. Please join me next week for a new episode of Hubwonk.
Joe Selvaggi talks with CATO Institute constitutional scholar Thomas Berry about the recently argued Moore v. U.S.A. case, which challenges the idea that income must be realized before it can be taxed.
Francine Klagsbrun on Golda Meir’s Leadership and the State of Israel
/in Education, Featured, Learning Curve, News, Podcast /by Editorial StaffRead a transcript
[00:00:00] Albert: Well, good day to everybody. Welcome back to another episode of the Learning Curve podcast. I am one of your co-hosts for this week, Dr. Albert Cheng from the University of Arkansas. And today I have Andrea Silbert co-hosting with me. Andrea, welcome to the show and why don’t you introduce yourself to our listeners.
[00:00:47] Andrea: Oh, I’m so honored to be here. Thank you so much, Albert. my name’s Andrea Silbert and I’m president of the EOS Foundation. We are an endowed charitable foundation that does grantmaking in the areas of anti-hunger and gender and racial justice. And we will be adding soon fighting all sorts of hatred, specifically antisemitism into our racial justice work.
[00:01:13] Albert: Yeah, and you know, speaking of antisemitism you have a news story to share with us on that topic, right?
[00:01:19] Andrea: I do, I do, and I have been following this for several years, and this is the level of antisemitism on college campuses. ADL, the Anti Defamation League, just published a report that found that nearly three quarters of all Jewish students on college campuses nationally have faced antisemitism. Antisemitism is extremely pernicious because it’s coming from the far left. It’s coming from many of the students who are pushing for civil rights, for equal rights for everybody. People from Black Lives Matter movement. Stop Asian hate, LGBTQ rights. And only this hatred and bullying is reserved for Israelis and Jews.
[00:02:11] Andrea: So, it’s very, very difficult. I found out about a year and a half ago that at University of Vermont. If you believe — if you as a student believed in Israel’s right to exist, you would be kicked out as a woman of the Sexual Assault Survivors Club. So UVM, there was a case that was filed with the Department of Ed’s Office of Civil Rights and they had to settle. But I have two students in college. My daughter Mia is a senior at Harvard. My son Benny is a freshman at Tulane. And when Benny was applying, I would not allow him to apply to UVM and similar issues have happened at Tufts University local with, you know, just going out if you believe in Israel’s right to exist.
[00:02:58] Andrea: You are really going to experience incredible antisemitism and I think now we all see and I’m very disappointed with what’s going on at Harvard. There are protests and they’re chanting “Intifada, Intifada,” the battle cry for killing Jews in the state of Israel and killing Jews globally. It is, it is shocking.
[00:03:20] Albert: Yeah, yeah, actually, Jay Green, Ian Kingsbury and I did a study not too long ago documenting how antisemitism surprisingly is more common among the highly educated you know, we kind of think antisemitism is a consequence of ignorance and education as a solution, but we actually found the contrary, that somehow you know, I guess it kind of explains what’s going on in college campuses that we have higher rates of double standards against Jews among the highly educated. So, yeah, it’s a serious topic one we ought to be paying attention to and working to address.
[00:03:53] Andrea: Yeah, one last thing is that it is coming out of what is called decolonization studies, takes a very ideological approach and says that Israel is the oppressor and Palestine is the oppressed and then has false information about Jews not being indigenous to Israel, false information about Jews being white, even though 50 percent of Israeli Jews are of color and et cetera, et cetera. And that is happening on high school campuses as well. This Decolonization studies, Jews as settler colonialist, anti-imperialism, it’s all gone amok.
[00:04:33] Albert: Mm hmm, Yeah, well, you know, speaking of what’s going on in our nation’s high schools, but also, you know, elementary school campuses. Yeah, I’ve got this other news story that came out recently in the Washington Post reporting about how D.C. teachers, teachers in our nation’s capital seem to be leaving the classrooms at, higher rates of late course, I, I don’t know that any of it’s connected to curriculum wars or anything that are going on in, elementary and secondary school campuses, but they reported some statistics close to 70 about 78% of teachers in the traditional public school system in D.C. stayed year over year in the past couple of years and in charter schools. It’s the rates actually a bit lower in terms of staying 62%. And the article goes on to talk about how there’s some low morale, maybe some lingering. Mental health issues from the pandemic controversy over the teacher evaluation system impact as a well-known program that rewarded teachers for improving student learning instituted by Michelle Rhee years ago.
[00:05:35] Albert: And so, yeah, I don’t know, I mean, the article kind of gives a glimpse of what’s going on the ground. I think there’s a lot of other details to think about. I mean, some questions that came to my mind. So actually, here in Arkansas, where I’m at, our teacher retention rates were pretty stable before and even during the pandemic. And there was a slight drop in teacher retention during the third year of the pandemic. But other than that the rate of staying and exiting was, pretty constant. And, you know, I have one or some of that’s going on in D.C. that actually in D.C. in the past couple years, we had this inflated rate of retention because teachers didn’t want to leave their jobs in a period of uncertainty in the pandemic.
[00:06:18] Albert: So, you know, that was one of the issues that kind of got touched upon. You know, and the other thought that I had about this new story was, you know, I was wondering which teachers are leaving. You know, years ago there’s some studies of the impact merit pay program, and I found that induced teachers who were less effective to leave the profession. And I can say here in Arkansas it turns out that teachers that had higher value added scores were more likely to stay. And so, you know, I’d like to see maybe some of these numbers broken out by teacher quality. But anyway, I don’t know. There’s stuff going on in D.C. with teacher turnover. And certainly teacher turnover can be disruptive. But I wonder if there’s some silver lining if we unpack the numbers a bit more. Anyway, I don’t know if you have thoughts on that, but that’s what I’d like to share this week.
[00:07:04] Andrea: I just think, again, as a mother who’s raised three children going through public schools, it is absolutely critical to retain teachers who have a lot of experience and who are committed to, teaching history. What I’m seeing more among some of the newer generation of teachers is some sense that we need to teach ideology there’s no place for that in the classroom. We need to teach facts on all sides. Yeah. That’s been my observation. My children had a very — they did not, they were not taught ideology at the school where they went. I live on Cape Cod and our schools are more socioeconomically diverse and rural. So, I think that they didn’t stray too far from “let’s stick with facts and history.”
[00:07:59] Albert: Yeah, and certainly another important aspect of good teaching. That’s it for the news this week. Stay with us on the other side of the break. We have Francine Klagsbrnn who’s going to talk to us about one of her books on Golda Meir. So, stay tuned.
Francine Klagsbrun is the author of more than a dozen books, including The Fourth Commandment, Remember the Sabbath Day, Jewish Days: A Book of Jewish Life and Culture Around the Year, and Lioness: Golda Meir and the Nation of Israel, which received the 2017 National Jewish Book Award Everett Family Foundation Book of the Year. Klagsbrun was a regular columnist for the Jewish Week, a contributing author to Lilith, and on the editorial board of Hadassah Magazine. Her writing has also appeared in the New York Times, the Boston Globe, Newsweek, and Miss Magazine. She lives in New York City. Francine, welcome to the show. Great to have you on.
[00:09:21] Francine: Thank you. I’m very happy to be here.
[00:09:24] Albert: Great. And actually, you know, we also want to take the time to just express our condolences for the passing of your husband as well. So, we’re really sorry to hear that.
[00:09:33] Francine: Thank you. I appreciate that. This is a difficult time for me. And he was a wonderful, wonderful psychiatrist.
[00:09:39] Albert: Hmm. You’re in our thoughts and prayers. So, let’s talk Golda Meir. You have a book about her and so, you’re an accomplished author on Judaism and definitive biographer of Golda Meir, Israel’s fourth prime minister. Why don’t you start by sharing with us your experience of researching and writing about this remarkable 20th-century female political leader?
[00:10:03] Francine: Well, it’s an interesting thing. I was asked to write the book by an editor at Schocken Books, which is part of Random House, and a good friend of mine is Robert Caro, the historian who writes about Lyndon Johnson, and he took me to lunch, and he said, the first thing you have to do, and he’s very well known for his biographies, he said, the first thing you have to do is you have to interview people, because they die. And if you don’t interview them right away, you’re not going to get their stories. So, I took that very seriously, and before I really knew, I know Israel history, but before I really knew anything in depth, I went to Israel and I began interviewing people. And over the course of my years of research, I did interview people, all of whom have passed away.
[00:10:49] Francine: Shimon Peres, who became the president of Israel, Amos Manor, who had been head of the Shin Bet, the CIA of Israel, Zvi Zamir, who was head of another secret [00:11:00] agency in Israel, Golda’s two children, her son and her daughter, whom I got to know quite well, who are both passed away now. Her grandchildren, who are still alive. And many other, I interviewed maybe a hundred or more people, many of whom are gone now. So that was wonderful advice to begin with. Then I also, I hired an Israeli researcher, a historian, who was just wonderful, who could, I must have gone back and forth about 20 times to Israel to do research. But he also could go, when I wasn’t there, could go to the archives and get material for me. And then we would discuss things for hours on the phone. We would discuss things that he found, things that I wanted to write, I would check it for this man, his name was Boaz, who lived in Israel, and that was very helpful. And then, in addition to that, I made a point of visiting all the places where Golda had lived in Israel, it was a very modest home in Ramat Aviv, which is outside of Tel Aviv. But I — she grew up in America — so, I went to the places she lived in in America. She grew up in much of her life in Milwaukee, there are museums, not exactly museums, but exhibitions set up where I could see some of what her life was like, and also traveled around Milwaukee to see what it was like. In Denver, where she lived some of the time, there was a reproduction of the home that she lived in, so I went there also. So, what I tried to do. And then I read dozens and dozens of books in English and in Hebrew. I read Hebrew. And, you know, absorbed what everybody had written. And what I tried to do was just get an overall holistic, as it were, picture of who this woman was.
[00:12:44] Albert: Sounds like a fascinating and enriching process. let’s talk about her life. So, Golda and her family were originally from Ukraine. and at that time it was part of Czarist Russia. And in her autobiography, she revealed that her earliest memories were of her father boarding up the front door in response to an imminent pogrom against the Jews. Yeah, could you talk about her families and other Jewish families is experienced in Ukraine and Eastern Europe living in shtetls and experiencing antisemitism, pogroms, you know, and the like.
[00:13:18] Francine: Yes, in those days, most of the Jews in the Russian Empire, which the Russian Empire then included Poland and Lithuania, most of the Jews lived in what was called the Pale of Settlement. They were shtetls, little towns, very poor, most of them and always fearing pogroms. and antisemitism. Now, Golda was not born in a shtetl. She was born in Kiev, a big city, which allowed Jews in and then expelled the Jews over the centuries, would allow them in and then expel them, and allow them in again and then expel them. When she grew up, her father was allowed to live there because he was an artisan, he was a carpenter, and they allowed Jewish carpenters, Jewish artisans to live there. But there was always the threat of antisemitism, and when her father made some furniture for the government, the government had issued commissions to carpenters to make furniture for them. Her father made beautiful furniture, and then when his name was attached to it, a Jewish name, the government rejected it.
[00:14:19] Francine: And so, they knew that this was not a good situation, and then there were always the threat of pogroms. Golda wrote about it, remembering her home being brought up instead. She never personally experienced a pogrom, but that threat hung over them all the time. And particularly, in 1905, there was a terrible pogrom in Kishinev [now Chisinau, Moldova), in which Jews were brutally murdered.
[00:14:42] Francine: And the whole pogrom mentality, as it were, spread to the cities all around, and so the Jews were under great, great pressure and, great threat and fear, constant fear that they were going to be murdered, and that was what Golda grew up with. So, her father left Kiev after his work was rejected, and with this incredible pogrom all hanging over their heads, and went to America, as did millions of Jews from the Russian Empire at that time.
[00:15:12] Francine: But the family, she and her family, went to Pinsk, which was now a city within that palace settlement. And it was a Jewish city, but again, the fear of pogroms hung over them. There was a big revolutionary movement at the time against the Tsar. Many Jews were taking part in it, including her older sister, and so her mother really feared for their lives. I mean, the Jews are now under great pressure, and finally decided they had to join her father in the United States, and that’s what they did.
[00:15:44] Albert: Yeah, so it was in, 1906 that Golda and her family immigrated to the United States and then they settled in Milwaukee you mentioned, where she attended public schools there. The second chapter of your book you’ve titled An American Girl. Could you talk about that? What were her experiences growing up, being educated in Milwaukee? assume she came across some American democratic principles and ideals that probably shaped her worldview?
[00:16:09] Francine: Yes, very much so. For one thing, Milwaukee was, it was very lucky for Golda, in a way, that her father settled in Milwaukee. Most of the Jews who came in those days settled in the big cities like New York or Chicago. And they lived in these, you know, terrible tenements and the dark. Now, Milwaukee, the family lived in great poverty, great poverty at first, but it was open. There were open fields. There were ferries. There was a sense of democracy, there was a sense of the pioneer spirit, conquering the West. Milwaukee still had that old sense of conquering the West, and Golda picked up, that pioneer spirit. In classroom, they studied civics, I looked at the civics books, and the history books that Golda would have used at that time, and they were all, today, you know, we don’t even use the word patriotic, people use it cynically, but nobody was cynical about patriotism in those days.
[00:17:06] Francine: And they spoke of the great benefits of American democracy, as opposed to what was going on in other parts of Europe. And Golda picked that up, loved it, and absorbed it. It really became part of her outlook. Beyond that, Milwaukee was also a socialist city. There was a socialist mayor there were others, socialism, not communism but socialism. People would get on soap boxes on Friday afternoon and spout their ideas, and she picked that up also, this sense of openness of being able to say what you think in a country that allowed you to say what you think, and you would not be persecuted for that. And that became very much part of her thinking.
[00:17:48] Francine: And much of her reading fed into this. She read Uncle Tom’s Cabin. She was very, very impressed by the anti-slavery feelings of that time. And these all became part of her own psyche and her own outlook. It was very much based on American democracy.
[00:18:05] Albert: So, let’s press into this a bit more, you know, because while she was living in the states in Milwaukee and also you mentioned Denver she and her family were shaped by emerging Zionist thought, women’s suffrage, organized labor. I mean, those are some of the other things going on. Could you talk about the impact of, those formative intellectual, religious, cultural experiences on Golda? And, as well as how they shaped really her desire to make aliyah, and yeah, so could you talk a bit more about that?
[00:18:33] Francine: Well, what happened is that Golda, left for a while, she left Milwaukee, and went to live with her sister, her older sister, Sheyna, whom she always idolized, in Denver. Now she left Milwaukee, just as an aside, because her parents wanted her to go to work and get married after elementary school, and she very much wanted to go to high school. So, as it was, she ran away from home and ran to Denver. And Denver, her sister and her sister’s husband had a kind of a circle of friends, who would meet regularly at their home. Many of these were people, most of them were people who had come from Russia, as had, well, Golda’s family. Many of them were people who were in the TB, tuberculosis hospitals in that area.
[00:19:17] Francine: So, they would meet there, and they would be, just like they had been in Europe and Russia, big discussions about things like women’s suffrage, voting, all sorts of things like that. And one of the discussions that was very central, as it had been in, Russia, was the discussion about Zionism. The early Zionists had gone, and very early Zionists, in the late 1880s, had built, had begun building settlements. Many of them died. They weren’t really equipped. They didn’t know how to dig the land, and so on. But they did build some settlements, and word about what they were doing came back.
[00:19:54] Francine: And there was a sense after all the pogroms and all the persecutions in Europe, and of course Theodor Herzl came in the middle of all this and, and proclaiming the idea of having a Jewish country, a Zionist country where Jews could be safe. I mean, the point was that they would be safe. They would have a land of their own. where they would not be persecuted, where they could fight back themselves, where they could protect themselves. And Golda was very taken with this idea of all the things that were discussed around those tables in Denver. This idea of Zionism really grabbed Golda. And she then became, at a very young age, she joined Zionist organizations when she went back to Milwaukee, what was called Poalei Zion, the labor Zionist organizations that was the most dominant.
[00:20:43] Albert: Well, so let’s, fast forward cause eventually she married and then moved to Palestine, which was then under the British mandate. She and her husband were accepted into a kibbutz where she worked in a variety of jobs and ultimately connected with the Labor Party. Yeah. Could you tell us about her life as a young Zionist at that point, and her hopes and dreams about the future of Israel?
[00:21:06] Francine: Well, she and her husband went to this kibbutz Merhavia. Her husband did not like kibbutz life, he was not happy at all, but she loved it. And she became sort of the center. She had a very vibrant personality. She took part in every discussion that took place there, but she also worked extremely hard, worked. If there was a hard job to do to Golda would volunteer for it.
[00:21:30] Francine: And she was smart, she developed for the kibbutz a new way of raising chickens that would give more eggs than they ever had before. She insisted that laborers clean their hands when they’re eating their herring. I mean, people live in this very sloppy kind of a way, very primitive way. And she brought up American ideas and insisted on those, but they also brought attention to her as somebody who was just sort of a natural leader. And so she did all that in the kibbutz when she and her husband left the kibbutz she had already made contact with some of the leaders of the Zionist labor movement, which was the main Zionist movement in the Mandate Palestine, as it had been in Russia and in the United States.
[00:22:19] Francine: And she had made contact with so many people. After her marriage fell apart she became involved with a man named David Remez, who was very powerful in that movement, and helped her get ahead, although it was her own abilities and wisdom that really helped her to move ahead. And she became the person who went to conferences, who spoke out, who put American ideas — people were very impressed with her, the fact that she could speak English so well. And she knew what people in America were thinking, and that was extremely helpful to them also. And so, gradually she moved up. Moved up, moved up [00:23:00] became involved in the Histadrut, which was the major labor movement in Palestine and got important positions in that, so that she began to get power.
[00:23:10] Francine: Now, Golda always said she never cared about power, but she did care about power, and she became as time went on, quite a powerful leader and somebody that others looked up to. And as the party moved along, Golda moved along, and really became one of the top people in the whole Zionist movement in Palestine.
[00:23:30] Andrea: Thank you so much, Francine. As a student of Israel myself, this is so fascinating to hear. So, let’s fast forward to 1947, with the British withdrawing from the mandate and the U.N. partition plan, which Israel accepted the Arab countries rejected, and then in May of 1948, Meir became one of the 24 signatories of the Israeli Declaration of Independence. And just a quick quote from her, which is so moving: “After I signed, I cried. When I studied American history as a schoolgirl, and I read about those who signed the U.S. Declaration of Independence. And there I was sitting down and signing a Declaration of Establishment.” Francine, could you talk about her role in the founding of the State of Israel and how she ultimately ascended to become the first and only female prime minister of Israel?
[00:24:27] Francine: Yes, it was a long journey, a very difficult one. One is, as I said about her work in the kibbutz, Golda always took on the most difficult assignments. So she worked harder than anybody. Each step of the way, she would be the person who volunteered to do the hardest work, and that accrued to her power and her importance on the way up.
[00:24:50] Francine: The other thing was, and this is an interesting thing. As a feminist, in some ways, I was critical of this. Feminists are today. Her first work, or the first important position she held, was with women’s organizations. One was the Women’s Workers Council in Palestine, and its counterpart, the Pioneer Women in the United States, which she headed. Later on in life she said, I never worked for women’s organizations because she didn’t want to be seen that way. So, she’s a little bit criticized for that because in fact these women’s organizations gave her her first real steps upward. But the reason she said this, and why it’s very important, is that there were terrific women in Palestine who were doing wonderful things for the women workers there.
[00:25:37] Francine: And now feminists are rediscovering them. Most people would not have heard of them, you know, Ida Meinman having schizophrenic names that you or most people would not know. You know the name Golda Meir. She did not want to be confined to women’s issues. She wanted to be in the broader world, the broader aspects of what people were [00:26:00] aiming for. And that’s what she did. So, as she moved along, she moved away from the women’s organizations, as I say, she had become very important in the Histadrut, the general labor organization. And she also had a great skill in speaking. When Golda spoke to an audience, every person in the audience felt she was speaking only to them, and she also, her other great ability was that she spoke English so well.
[00:26:27] Francine: So, on the way up, she was the person who went back and forth to the United States to raise money. Nobody could raise money the way Golda could raise money because she knew America, and she knew American people, and she knew how to speak English so well, so she was able to do that. So as things got closer to a state being declared, it became clear that a great deal of money was needed, and David Ben-Gurion, who was now heading this whole labor movement, and moved toward creating a state, sent Golda, or he and his cabinet sent Golda to the United States early in 1948 to raise money.
[00:27:07] Francine: They had sent other people who couldn’t get very much money. Golda came to the United States, and she raised, over time, $55 million dollars, which, at that time, was unheard of. An enormous amount of money. And she was considered, in that sense, David Ben-Gurion considered her one of the founders of the state, for that alone, because it was so important to have that money at that time.
[00:27:32] Francine: And after raising that money, after the state was declared, Ben-Gurion wanted Golda, and he wanted to show that this new country with equal rights for women as well as men, wanted her in the cabinet. She was in the sort of larger cabinet that other positions had been taken, but she was in this sort of larger cabinet. Gradually, again, becoming known, very well known she became the minister to Russia, she became Israel’s first labor minister, she had very important laws passed about insurance and protecting women and children, she then became the foreign minister, the first foreign minister, first woman foreign minister in the world at that time, in fact, people would say to her, how does it feel to be the first woman minister and Golda would say, “I don’t know, I was never a man.” And from there on, she was so well known when it became time when Ben-Gurion had resigned and Levi Eshkol, to pick another prime minister, there was a struggle between two young men, Yigal Allon, who had been a hero of the war, of the Independence War, and Moshe Dayan, who was a big hero in Israel, but she became the candidate, sort of in a senses, a compromised candidate between these two young men, but the candidate most people wanted at that time. And she became prime minister.
[00:28:57] Andrea: Yes, so she becomes prime minister in [00:29:00] 1969, and as prime minister Golda negotiated arms agreements with Richard Nixon and Henry Kissinger and had dozens of clandestine meetings with Jordan’s King Hussein in the unsuccessful pursuit of a land for peace agreement with Israel’s neighbors. Would you talk about how Golda managed Israel’s relations with the Palestinians and Arab nations?
[00:29:23] Francine: It’s a very complicated subject because it goes back to 1967 when Golda was no longer a foreign minister. She had resigned. And she was kind of in charge of the party. But in ‘67, in the 1967 war, as you know, Israel won within six days, having been threatened by the Arab nations, feeling that they were going to lose everything, they won many territories, the Golan Heights, the West Bank, Gaza. And so on, and there was a big question about what to do with these lands, and some of the people, Moshe Dayan particularly, felt that Israel should really annex them and should build settlements where there was a great population of Arabs.
[00:30:09] Francine: Golda felt that it would be a big mistake for Israel to take over Arab lands where there were many Arabs, and her position was we needed to do what we have to do for security reasons so we don’t get threatened again, as we did in 1967, but we cannot absorb millions of Arabs, we can’t live that way, and nor can we make them, they will have low-level jobs, we will have higher jobs, it will be an unfair relationship.
[00:30:37] Francine: So, she was very opposed to that. She was not in favor of giving back everything, or going back to the 1967 borders because she felt that, after all, we weren’t safe then, what good would it do us now? But she felt that Israel should keep certain borders for security reasons. She didn’t like to give back as much as they could.
[00:30:56] Francine: So, that was what she tried to negotiate with the Arabs with Arab leaders. She didn’t get very far, because their attitude was they didn’t want to give up anything. They didn’t want to compromise on this. They want all their land back. Now, she did make one very bad mistake. She didn’t recognize Palestinian nationalism. At that time there was very little nothing nationalism as such, people saw the Palestinians as refugees from the War of Independence. It was just the beginning of a nationalist movement. But Golda made the mistake of saying there’s no such thing as Palestinians. And she never lived that down, although she didn’t mean it.
[00:31:34] Francine: She understood that there were Palestinians. She lived among Palestinians. But she felt that there was no real nationalism movement. She doesn’t understand that it was beginning. So that was, that was a blind spot for her. But other than that, she was, I would say, on the more liberal side of making peace with the Arab countries.
[00:31:53] Andrea: Yeah. And I remember as a young girl and the world watched during the 1972 Olympic Games in Munich, we watched the Palestinian terrorist group, Black September, murder members of the Israeli Olympic team. Would you talk about this episode and how as prime minister Golda addressed and responded to the massacre in Munich and other acts of terrorism against Israelis?
[00:32:18] Francine: It was a terrible, terrible situation in Munich. It was this group called Black September. They kidnapped Israeli athletes and eventually they murdered them. They were trying to get out of the country. There was some mix-up, and they murdered them all. Golda was horrified, of course, as was all of Israel and all of the world.
[00:32:38] Francine: And she was told afterwards by Zvi Zamir, this man whom I interviewed, who was in charge of much of the Secret Service, that the way to stop terrorism — Golda’s attitude, by the way, was, you don’t negotiate with terrorists. You know, they will kidnap somebody and try to get somebody else out of jail, as we see what’s going on today.
[00:32:59] Francine: But her attitude was, you don’t give in to that, and you don’t negotiate with that. The attitude after Munich was, we have to stop this terrorism. And the way her advisors thought to stop it was, to kill everybody involved in this terrible, terrible incident in Munich. And at first, she was opposed to that. She felt you can’t kill people without a fair trial what if we make a mistake and our boys are going to be in trouble, our young men who are in the army are going to be in trouble for killing the wrong person. But she finally gave in. And so, one by one, many of these Black September terrorists over some years, were killed. They would pick up a phone, and the phone would explode, or a car would crash into them. And each time they chose a person, that’s where the first, the term targeted assassinations really began. And each time they chose someone to do that, they would bring the name to Golda. She would either approve by nodding her head, or say put it off, or disapprove. Finally, they stopped, because in fact, they did kill the wrong person. But Zvi Zamir and the others felt that this stopped the kind of terrorism that had been going on at that time.
[00:34:13] Andrea: Yeah. And then, of course, not long after, Israel is hit with the Yom Kippur War, unaware — or less aware — beginning on October 6, with a coalition of Arab states led by Egypt and Syria. Could you briefly discuss this dramatic chapter of the Arab Israeli conflict and how Golda dealt with the crisis?
[00:34:34] Francine: This has come under great discussion today because of what happened on October 7 here, this year. Anwar Sadat, who was the president of Egypt, kept threatening, he wanted all his lands back, not only his lands, but the lands that had been taken in the 1967 war. All the areas, the West Bank, all of Sinai. Golda tried to negotiate, she had many, many secret meetings with King Hussein of Jordan. She tried to reach Sadat to have secret meetings with him through the Romanian prime minister, through the German chancellor, through the United States. But Sadat would never listen to that. But he was determined that everything had to be returned before they can negotiate.
[00:35:19] Francine: And he kept threatening war. But Golda is, you know, after ’67, people were so smug, as it were, the Israelis were so sure of themselves. Well, let them threaten, we can kill them in a minute. We can, we can win any kind of a war. And they didn’t believe the threat. There was something called the Concepcion, the conception, which was that Syria would not go to war against Israel without Egypt, Egypt would not go to war against Israel without certain ammunition from the Soviet Union which it didn’t have.
[00:35:48] Francine: Golda was very nervous about this. Her instinct told her that they had to be prepared for war. But she kept being reassured and, you know, Golda has been blamed for the Yom Kippur War. It’s coming out now more and more that she had been the one who was worried, and her generals kept reassuring her that the term was there’s a low probability of war.
[00:36:10] Francine: And when war broke out, it came as a surprise, a spy had told him it would break out that evening, but it broke out in the afternoon. And Golda was blamed for that and continued to be blamed. She never forgave herself for not listening to her own instinct, which was, there was going to be some war, they better be better prepared than they are. And she said, I will never again be the person I was before the Yom Kippur War, and she never was.
[00:36:37] Andrea: Yeah, how tragic. And as you said just so similar the echoes so similar to the lack of preparation today for that attack looking back, you know Golda Meir was the prime minister of Israel and a major player on the world stage in the late ‘60s and early ‘70s. This is well before Britain first elected a female prime minister in 1979, and to this day, the U.S. hasn’t elected a woman president, so I know that you said that Golda didn’t want to be pigeonholed, but regardless, for someone like me growing up, she was the only role model of female democratic leadership of a nation. And what can young people today learn from her life and her legacy?
[00:37:24] Francine: She was always herself. I think that’s one thing to begin with. She didn’t try to be a man. She wanted to be in, you know, in the groups, and she didn’t want to be confined to women’s groups, as it were, but she always dressed nicely, not that she was a fashion plate by any means, but she dressed nicely, she always had her nails done, she cared about how her hair looked, and she did something else that was interesting. She took symbols of women, at that time and still today, the kitchen. Women were in the kitchen and cooking. And she turned them into power symbols. The kitchen became her kitchen cabinet, which really made the decisions. Before her regular cabinet met, of what they were going to do. So, she knew how to use feminine attributes to apply them to problems at hand. But she also worked very hard. She always said, she gave it on a woman thing here, she always said it’s twice as hard for a woman as it is for a man to get ahead. And she lived that way, she worked that hard.
[00:38:27] Francine: Now I wouldn’t say that’s so true today, but there’s still some truth in it. So, I think there’s that. The other thing she did, is that she, at every meeting, it was truly democratic in the sense that she always allowed every other person, every person in the meeting to speak first, to give their ideas, and she listened very, very carefully to these ideas.
[00:38:48] Francine: In the end, she made her decisions, and she could be autocratic, but she always It had this democratic way of running meetings, of running the government. Listen to everybody, hear what they have to say, then make the decisions. And not try to just show off who you are. She lived also very modestly. She didn’t try to, you know, be, oh, look at me, I’m so important, I’m a prime minister. Today, the prime minister lives in an enormous house. She lives in this very modest home that she shared with her son. I was at their home, and it was very modest. And she would turn off the lights when she left her office to preserve electricity. She lived as real person, and I think in a sense that is a legacy that’s worked very hard. But for a woman today, don’t try to be somebody else. Be who you are, live your life that way.
[00:39:41] Andrea: Well, thank you so much. That is just such great insight. And now my understanding is you’re going to read a collection from your book.
[00:39:49] Francine: Yes, okay. In her farewell talk to the American Jewish Golda told of being asked by a young man why she had left the America she loved to go to the land of Israel. Quote: “I was selfish, she answered him. I heard something was going on over there. Something was being built, and I said, What? And I won’t have a share in it? No, I’m going. She went. She shared in building a state out of her vision, and for nearly 60 years, helped shape every aspect of that state. In spite of faults or failures, she left a legacy for Israel, the Jewish people, and the world at large —of courage, determination, and devotion to a cause in which one believes, however difficult the course.” Nothing in life just happens, she once said. You have to have the stamina to meet obstacles and overcome them. To struggle.
[00:40:47] Andrea: Wow. Thank you so much, Francine.
[00:40:49] Albert: Thank you so much, Francine. It was a fascinating interview. And thanks for sharing all insight into her life.
[00:40:55] Francine: You’re very welcome.
[00:40:57] Albert: [00:41:00] Okay, and the Tweet of the Week comes from Education Next this week. And it’s a Tweet about an article written by Rick Hess. the Tweet says Increasingly impressive transcripts and rising grades have yielded less actual student learning. How can that be? It’s because course titles and grades are cheap. And I think that’s a really compelling short post by Rick has about great inflation and, transcript packing. I don’t even know if that’s a, a word. But essentially Rick has, sites plenty of data showing about how GPAs have [00:42:00] risen over time transcripts have become more impressive over time and yet scores on standardized assessments have remained flat or even fallen. And so what explains that? And his argument there is it’s a lot of grade inflation, a lot of actually he cites a lot of other data points surveys of teachers that feel pressure to give kids good grades when they demand it.
[00:42:25] Albert: You know, referencing this, unspoken pact where look, if, grades are good, students are happy, classrooms are more harmonious because of that, less contention and everyone’s happy. So, certainly there’s some perverse incentives, if you will, that that’s going on. So anyway, check out that article. Yeah, Andrea, I don’t know if you have thoughts about that.
[00:42:44] Andrea: I actually do. So, I have three children. My older two are very, we’re very strong students and my youngest has a learning disability and is as smart as my older two, but had difficulty reading. And so, testing has been very important for me. And I always told my kids that Massachusetts, the MCAS was a test of their teachers. It wasn’t about them. I needed to know how their teachers were doing. So it was very important to me. My middle daughter was getting A-pluses in fourth grade in her classes around writing and she then took the standardized test and did very, very poorly.
[00:43:19] Andrea: And I went to the school and they told me she had an A-plus. So that wasn’t accurate and it just needs to be accurate. We need to know as parents what our kids are doing. And I felt like, at the high school level, our high school was very strong. I did move. My children and we have school choice by town where I moved them to a different district because I wasn’t happy with her getting an A-plus when I thought she didn’t know how to write.
[00:43:45] Andrea: So, at the high school level, you know, I knew that they were doing well because they were getting good grades on their AP tests, so that meant that they were learning the material, but it’s, really important. It’s really important to have measures to know if kids are learning and not just to have this great inflation. Yeah, happening. Also at the college level.
[00:44:07] Albert: Yeah. Yeah. We, I personally think we do a disservice to our students. I don’t know. I mean, I might go as far as say, we’re helping them live a lie really about their quality and where they might improve. So, yeah, certainly a tough issue and that maybe deserves lot more attention. Well, Andrea been a pleasure guest co-hosting this week’s show with you. Thanks for being on.
[00:44:28] Andrea: Oh, thank you so much for having me. I mean, this topic is so important. Miss Klagsbrun’s work is fascinating to me. So, I am honored to have been asked.
[00:44:40] Albert: Hopefully we’ll see you on again. And before we sign off for this week, I just want to make sure we plug next week’s episode, we’re going to have Emily Hanford, who’s a senior correspondent with American Public Media and the producer of Sold A Story. This is a podcast about the science of reading and literacy, and, I’ve had the pleasure of seeing her give a talk and listening to some parts of her podcast. Go check it out it’s fascinating stuff on reading instruction, phonics instruction. But join us next week as we interview her. And so, until then be well and I’ll see you next week. ?
This week on The Learning Curve, guest co-hosts Prof. Albert Cheng of the University of Arkansas and Andrea Silbert, president of the Eos Foundation, interview Francine Klagsbrun, the author of Lioness: Golda Meir and the Nation of Israel. They discuss the story of the woman who left Kiev as a child, grew up in Milwaukee, emigrated to Mandatory Palestine, was a signatory to the declaration of independence for the state of Israel, and rose to become that nation’s fourth prime minister. Klagsbrun discusses Meir’s role in peace and war, her model of democratic leadership, and what young people today can learn from her remarkable life and legacy. She closes the interview with a reading from her biography of Golda Meir.
Stories of the Week: Andrea discussed a story from NBC News about the rise in antisemitism on American college campuses this fall, with 73 percent of Jewish students reporting having experienced or witnessed antisemitism. Albert discussed a Washington Post story about teacher turnover in the Washington, D.C. public schools.
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Tweet of the Week: