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California Dem pols scrambling in wake of cuts to deductibility of state and local taxes
- Thread starter Tom B
- Start date
Two things are going to happen in California.
First the Democrats in the California State Legislature are going to figure out a way to breach/compromise Proposition 13 which limits the rate of increase of property taxes. Prop-13 has been assailed by the Dems for years.
The second bit of unpleasantness will be the State and many municipalities defaulting on their pension payments ultimately causing people to simply lose their pensions. This is also going to occur in Illinois.
If you are living comfy on a State or local government pension in California or Illinois you are in for a rude shock. Some of these pensions are mandated in the state constitution but they will be defaulted upon just the same.
First the Democrats in the California State Legislature are going to figure out a way to breach/compromise Proposition 13 which limits the rate of increase of property taxes. Prop-13 has been assailed by the Dems for years.
The second bit of unpleasantness will be the State and many municipalities defaulting on their pension payments ultimately causing people to simply lose their pensions. This is also going to occur in Illinois.
If you are living comfy on a State or local government pension in California or Illinois you are in for a rude shock. Some of these pensions are mandated in the state constitution but they will be defaulted upon just the same.
Editorial
Losers in the GOP tax plan, blue states are unwisely turning to tax evasion
Republicans say the $1.5-trillion tax cut they passed last month will produce far more winners than losers, with the typical family of four earning the median income saving more than $2,000 this year. But the losers will be easier to find in states with high tax rates and elevated property values — like, say, California.
That’s because the law slashes a tax break that was uniquely valuable to residents of those states: the deduction for state and local property, sales and income taxes. Starting this year, taxpayers will be able to deduct no more than $10,000 in state and local tax payments per household. By comparison, the average deduction for state taxes claimed by Californians on their 2015 returns was nearly $18,500. Depending on the taxpayer’s bracket, losing $8,500 in deductions could translate into a tax increase of more than $3,000.
Similar tax hikes loom for residents of New York, Connecticut, New Jersey and other high-tax, high-cost states. But state lawmakers aren’t ready to accept the hand that Congress has dealt; instead, they’re looking at ways to change their own tax codes to help their residents evade the higher federal levy.
Their outrage at the slap from Washington is understandable; it seems hardly coincidental that congressional Republicans would target a deduction that matters most to blue states. But rather than respond with real tax reforms of their own, they’re resorting to tax-dodge gimmickry.
unveiled Jan. 3 in California. De León would enable residents to contribute money to a new “California Excellence Fund” in exchange for an equal amount of tax credits — for example, a family that owed $4,000 in state taxes could contribute $4,000 to the fund and wipe out its state tax bill. They could then deduct their contribution to the fund from their federal taxable income, just as they used to do with their state tax payments. That’s because the new federal tax law leaves the deduction for charitable contributions intact, unlike the one for state and local taxes.
The Internal Revenue Service has blessed similar arrangements that California has used to raise money for college scholarships, and that several states use to preserve land from development or generate money for private school vouchers. But it’s one thing to offer a tax break to try to support a public project or service; it’s another to do it solely to cut Californians’ federal tax bills. Passing the De León bill would be the state’s version of setting up a shell company in the Cayman Islands in order to shelter Californians’ income.
Besides, the history of such donation-for-tax-credits schemes shows how vulnerable they are to abuse. Just one example: The Trump National Golf Course in Palos Verdes qualified for a multimillion-dollar state tax credit as well as a hefty federal tax write-off by granting an easement over 11.5 acres of its property to a local land conservancy, effectively preventing 16 homes from being built on the site. But the club had no apparent plans to develop the acreage — it was being used mainly as a driving range.
We get it — the GOP tax bill is bad policy piled on bad policy, and blue states feel as if their pockets are being picked to shower riches on someone else.
less than a third of households itemize deductions, although the percentage rises dramatically among those who earn more than $75,000 a year. In California, only 34% claimed a deduction for state and local taxes on their 2015 returns. It’s safe to assume that the other 66% will come out ahead under the new law.
In short, the new tax law produces winners and losers, as big changes in the tax code invariably do. With one of those changes hitting high-cost, high-tax states particularly hard, Californians are naturally suspicious and looking to fight back. There are reforms to the state tax code that could help reduce the maddening volatility of its revenue while also helping on the federal tax front — for example, by reducing income taxes in favor of new levies on carbon and services. But that’s not the approach taken by De León’s bill. Instead, it offers a clever tax-avoidance scheme, exploiting a loophole that Congress should have closed long ago to magically transform tax payments into “charitable contributions” — as if the state budget were a food bank or the Red Cross. Californians deserve a better tax overhaul than Congress just delivered, as do all Americans, but this isn’t the way to get one.
http://www.latimes.com/opinion/editorials/la-ed-salt-tax-gimmick-20180106-story.html
Losers in the GOP tax plan, blue states are unwisely turning to tax evasion
Republicans say the $1.5-trillion tax cut they passed last month will produce far more winners than losers, with the typical family of four earning the median income saving more than $2,000 this year. But the losers will be easier to find in states with high tax rates and elevated property values — like, say, California.
That’s because the law slashes a tax break that was uniquely valuable to residents of those states: the deduction for state and local property, sales and income taxes. Starting this year, taxpayers will be able to deduct no more than $10,000 in state and local tax payments per household. By comparison, the average deduction for state taxes claimed by Californians on their 2015 returns was nearly $18,500. Depending on the taxpayer’s bracket, losing $8,500 in deductions could translate into a tax increase of more than $3,000.
Similar tax hikes loom for residents of New York, Connecticut, New Jersey and other high-tax, high-cost states. But state lawmakers aren’t ready to accept the hand that Congress has dealt; instead, they’re looking at ways to change their own tax codes to help their residents evade the higher federal levy.
Their outrage at the slap from Washington is understandable; it seems hardly coincidental that congressional Republicans would target a deduction that matters most to blue states. But rather than respond with real tax reforms of their own, they’re resorting to tax-dodge gimmickry.
unveiled Jan. 3 in California. De León would enable residents to contribute money to a new “California Excellence Fund” in exchange for an equal amount of tax credits — for example, a family that owed $4,000 in state taxes could contribute $4,000 to the fund and wipe out its state tax bill. They could then deduct their contribution to the fund from their federal taxable income, just as they used to do with their state tax payments. That’s because the new federal tax law leaves the deduction for charitable contributions intact, unlike the one for state and local taxes.
The Internal Revenue Service has blessed similar arrangements that California has used to raise money for college scholarships, and that several states use to preserve land from development or generate money for private school vouchers. But it’s one thing to offer a tax break to try to support a public project or service; it’s another to do it solely to cut Californians’ federal tax bills. Passing the De León bill would be the state’s version of setting up a shell company in the Cayman Islands in order to shelter Californians’ income.
Besides, the history of such donation-for-tax-credits schemes shows how vulnerable they are to abuse. Just one example: The Trump National Golf Course in Palos Verdes qualified for a multimillion-dollar state tax credit as well as a hefty federal tax write-off by granting an easement over 11.5 acres of its property to a local land conservancy, effectively preventing 16 homes from being built on the site. But the club had no apparent plans to develop the acreage — it was being used mainly as a driving range.
We get it — the GOP tax bill is bad policy piled on bad policy, and blue states feel as if their pockets are being picked to shower riches on someone else.
less than a third of households itemize deductions, although the percentage rises dramatically among those who earn more than $75,000 a year. In California, only 34% claimed a deduction for state and local taxes on their 2015 returns. It’s safe to assume that the other 66% will come out ahead under the new law.
In short, the new tax law produces winners and losers, as big changes in the tax code invariably do. With one of those changes hitting high-cost, high-tax states particularly hard, Californians are naturally suspicious and looking to fight back. There are reforms to the state tax code that could help reduce the maddening volatility of its revenue while also helping on the federal tax front — for example, by reducing income taxes in favor of new levies on carbon and services. But that’s not the approach taken by De León’s bill. Instead, it offers a clever tax-avoidance scheme, exploiting a loophole that Congress should have closed long ago to magically transform tax payments into “charitable contributions” — as if the state budget were a food bank or the Red Cross. Californians deserve a better tax overhaul than Congress just delivered, as do all Americans, but this isn’t the way to get one.
http://www.latimes.com/opinion/editorials/la-ed-salt-tax-gimmick-20180106-story.html
Yes... but we have been hearing things like that since I moved here in the late 80s. Calpers is insolvent. The city of San Diego has given too much away for democrat votes and will be insolvent. the State is really many trillions in debt...etc
I am not saying you are not correct... I am just saying it might not happen in CA unless there are fiscally conservative republicans in charge and FED turns off it money spigot to teach voters a lesson.
I am not saying you are not correct... I am just saying it might not happen in CA unless there are fiscally conservative republicans in charge and FED turns off it money spigot to teach voters a lesson.
Two things are going to happen in California.
First the Democrats in the California State Legislature are going to figure out a way to breach/compromise Proposition 13 which limits the rate of increase of property taxes. Prop-13 has been assailed by the Dems for years.
The second bit of unpleasantness will be the State and many municipalities defaulting on their pension payments ultimately causing people to simply lose their pensions. This is also going to occur in Illinois.
If you are living comfy on a State or local government pension in California or Illinois you are in for a rude shock. Some of these pensions are mandated in the state constitution but they will be defaulted upon just the same.
Editorial:
Or they could just lower the taxes ... Nah.
Editorial Board
Unless you’re holed up on Gobbler's Knob with Punxsutawney Phil, you know that a new law will limit to $10,000 the amount you can deduct on your federal return for state and local taxes. This is terrible for high-tax politicians in high-tax states. We’re thinking of one place with a struggling, jobs-challenged economy where citizens pay some of the nation’s most egregious property taxes, yet taxaholic lawmakers just raised the personal income tax rate by 32 percent. A place that’s losing population at an accelerating rate. Clue: Starts with “I,” rhymes with “unemploy.”
In the past, politicians could increase these state and local taxes to high heaven, then tell angry taxpayers to stop squealing: Hey, the IRS lets you deduct everything you give us. Those rubes in low-tax Idaho, South Dakota and Maine will subsidize you. Sweet!
Now, though, the limit on this deduction makes citizens in high-tax states likelier to rebel over the amount of Other People’s Money the pols collect. But never underestimate the yearning of the tax-and-spenders to defend their right to more revenue. Hence news stories about blue-state officials grasping for ways to game the new law.
On Wednesday, Gov. Andrew Cuomo got a standing ovation during his State of the State speech by promising to challenge the law in court. Fair enough. But Cuomo also is exploring replacing his state’s income tax with a state payroll tax, evidently paid by employers, much as they now pay half of their workers’ dues to Social Security.
http://www.chicagotribune.com/news/...-tax-salt-state-deduction020180103-story.html
Or they could just lower the taxes ... Nah.
Editorial Board
Unless you’re holed up on Gobbler's Knob with Punxsutawney Phil, you know that a new law will limit to $10,000 the amount you can deduct on your federal return for state and local taxes. This is terrible for high-tax politicians in high-tax states. We’re thinking of one place with a struggling, jobs-challenged economy where citizens pay some of the nation’s most egregious property taxes, yet taxaholic lawmakers just raised the personal income tax rate by 32 percent. A place that’s losing population at an accelerating rate. Clue: Starts with “I,” rhymes with “unemploy.”
In the past, politicians could increase these state and local taxes to high heaven, then tell angry taxpayers to stop squealing: Hey, the IRS lets you deduct everything you give us. Those rubes in low-tax Idaho, South Dakota and Maine will subsidize you. Sweet!
Now, though, the limit on this deduction makes citizens in high-tax states likelier to rebel over the amount of Other People’s Money the pols collect. But never underestimate the yearning of the tax-and-spenders to defend their right to more revenue. Hence news stories about blue-state officials grasping for ways to game the new law.
On Wednesday, Gov. Andrew Cuomo got a standing ovation during his State of the State speech by promising to challenge the law in court. Fair enough. But Cuomo also is exploring replacing his state’s income tax with a state payroll tax, evidently paid by employers, much as they now pay half of their workers’ dues to Social Security.
http://www.chicagotribune.com/news/...-tax-salt-state-deduction020180103-story.html
Say goodbye to Proposition 13, bitches!
California can't figure itself out. Jerry Brown is the answer.
That is, if you're into tyranny.
http://westernfreepress.com/2018/01...ance-will-meet-the-constitutional-juggernaut/
California can't figure itself out. Jerry Brown is the answer.
That is, if you're into tyranny.
http://westernfreepress.com/2018/01...ance-will-meet-the-constitutional-juggernaut/
most homeowners are not going to let prop 13 go easily.
I think it will be a big fight. But with 54 percent of CA now being renters... there is a chance they will find a way to dismantle or repeal it.
I think it will be a big fight. But with 54 percent of CA now being renters... there is a chance they will find a way to dismantle or repeal it.
Say goodbye to Proposition 13, bitches!
California can't figure itself out. Jerry Brown is the answer.
That is, if you're into tyranny.
http://westernfreepress.com/2018/01...ance-will-meet-the-constitutional-juggernaut/
most homeowners are not going to let prop 13 go easily.
I think it will be a big fight. But with 54 percent of CA now being renters... there is a chance they will find a way to dismantle or repeal it.
Sorry to disagree. Prop 13 has been the bane of demoncrats for years. Demoncrats blame the failing public educational system, library closures/reduced hours, and any other failures on Prop 13 as the clinchpin. Notice how the demoncrats aren't blaming Moonbeam and themselves for the crime increases.
It appears that Lanie Kazan (http://greginhollywood.com/lainie-k...-groceries-from-a-gelsons-market-in-la-153663) is the only person in California who has actually been arrested for stealing from a supermarket. Homeless people do it every day of the week.
Actually, I'm even more surprised Tom Steyer hasn't started a movement.
i have no problem with you thinking otherwise. no one really knows. I think it would have to be repealed by popular vote not by the legislature.
There is a better chance that the people would agree to repeal it with respect to commercial properties. However, with respect to residential properties I think the older people will make sure it does not get repealed.
There is a better chance that the people would agree to repeal it with respect to commercial properties. However, with respect to residential properties I think the older people will make sure it does not get repealed.
Sorry to disagree. Prop 13 has been the bane of demoncrats for years. Demoncrats blame the failing public educational system, library closures/reduced hours, and any other failures on Prop 13 as the clinchpin. Notice how the demoncrats aren't blaming Moonbeam and themselves for the crime increases.
It appears that Lanie Kazan (http://greginhollywood.com/lainie-k...-groceries-from-a-gelsons-market-in-la-153663) is the only person in California who has actually been arrested for stealing from a supermarket. Homeless people do it every day of the week.
Actually, I'm even more surprised Tom Steyer hasn't started a movement.