The Supreme Court’s recent consideration of Moore v. United States has sparked a broad and deep academic interest in the history of the realization concept in U.S. income tax law. Realization, of course, refers to the mechanic, explicit or implicit across broad swaths the current Internal Revenue Code and Treasury Regulations, that measures taxpayers’ income by reference to identifiable events that fix the timing and amount of that income. Although the Moore majority sidestepped the issue of whether the Constitution requires realization when taxing income, the Moore opinions indicate that past understandings of income will inform the Court’s future forays into the constitutionality of tax statutes. History and tradition have come to federal income tax law. As Conor Clarke aptly quipped after oral arguments in Moore, “we are all tax historians now.”

In The Past and Future of Taxing “Incomes,” Clint Wallace and Bret Wells take on this mandate with a careful and nuanced exploration of the theory and practice of taxation from the Gilded Age through the interwar period and beyond. Wallace and Wells find that, among tax theorists, realization was a familiar but flexibly applied concept, rather than an essential feature of income taxation. As Wallace and Wells demonstrate, this understanding predated the Court’s decision in Eisner v. Macomber, the oft-cited (and long-criticized) doctrinal touchstone for proponents of a constitutional realization requirement. Moreover, Wallace and Wells illuminate the emergence—and eventual acceptance by the government—of an ad hoc, taxpayer-friendly mark-to-market (that is, nonrealization) regime for dealers in commodities contracts. This fascinating business and administrative history concretely shows the contingency of realization as a concept in the early years of the modern U.S. income tax. These histories and traditions, with an emphasis on the plurals, are important to any principled construction of the legal landscape of the past.

From this historical context, Wallace and Wells recover a “hydrological conception of income” that highlights the concept’s temporal aspects (4). Income is a flow, measured over time, much in the way that precipitation passes from headwaters to lakes to rivers to oceans at different rates and by different paths. The fluid metaphor is rich, and Wallace and Wells deploy several water-based puns to heighten the effect. This metaphor also drives Wallace and Wells’s central normative insight: concerns about the distinction between income and capital—so crucial in the political and legal context of Moore—are well-policed by the concept of basis in income taxation. Indeed, a necessary component of any income tax system is a mechanism that tracks which of a taxpayer’s dollars already have been subject to tax. This definitional role of tax basis is recognized, for example, in the law governing the creditability of foreign taxes that constitute income taxes “in the U.S. sense.” For Wallace and Wells, tax basis may serve “as a limiting factor” for the scope of income taxation “without binding Congress [to] a single timing rule,” as would a universal realization requirement (54).

When the stakes are all-or-nothing, Wallace and Wells are undeniably correct. A strict and rigid realization requirement, however defined, could eviscerate the current U.S. income tax system and foreclose legislative and administrative reforms to address overt cases of abuse. As I have argued, the ramifications of such a requirement likely are understated, especially as they implicate the complexity of the U.S. tax system. But the woefully underspecified nature of any constitutional realization requirement leaves open another option: courts may lean into realization’s contextual ambiguities to accommodate (some) current practices and curtail (some) forms of abuse. My sense is that this texture-oriented perspective comports reasonably well with Wallace and Wells’s historical analysis (as well as that of others, including amici in Moore). Before and after the issuance of Macomber, realization represented one (contested) consideration in constructing a concept of taxable income. If courts adopted a flexible (or accommodating) approach to realization under the Constitution, much of the U.S. tax system’s integrity could be salvaged.

In addition, I am wary of a turn towards tax basis as a limiting principle on Congress’s power to enact legislation—probably more wary than I am of a constitutional realization requirement. Under current law, many of the statutory and administrative rules governing tax basis establish seemingly arbitrary or contradictory principles. For example, one might contrast the regulations addressing part-gift, part-sale transactions among family members with the less-formal norms governing part-sale, part-distribution transfers by corporations to shareholders. Alternatively, one might compare statutory requirements across the various categories of tax-free corporate reorganizations. Just as realization is not a Platonic concept, there is no natural law of tax basis. For this reason, constitutionalizing tax basis (and it’s not clear to me that Wallace and Wells would go this far) runs risks not dissimilar from those attached to a constitutional realization requirement.

Finally, Wallace and Wells’s excellent article ably illustrates the broader perils of historicist approaches in constitutional law. The adjudicative process identifies winners and losers with a clarity rarely reflected in the historical record. Viewed over time, ideas often are contested, contingent, and pluralistic, and finding a determinative touchstone frequently requires pushing countervailing evidence to the margins. We should expect tax history to be no less messy, and Wallace and Wells do great work in drawing out these complexities. As a corollary, we probably should not expect courts to move much beyond lawyer’s histories in reaching definitive outcomes in concrete cases. By building our knowledge about the past, Wallace and Wells provide a platform for understanding (and perhaps critiquing) courts’ use of history in the context of tax law.

Overall, Wallace and Wells’s The Past and Future of Taxing “Incomes” is a valuable contribution to scholarly debates about constitutional realization, as well as crucial context as courts consider constitutional issues in taxation. Law school faculty, historians, and policymakers would be well-served by reading Wallace and Wells’s important article.