Trump Administration Deals Another Blow to California
The LA Times reports that the Trump Administration has dealt another blow to the liberal paradise of California, this time taxes:
The Internal Revenue Service and Treasury Department on Thursday moved to block efforts by lawmakers in California and other Democratic-controlled states to help their residents avoid a new limit on state and local tax deductions.
The proposed rule, which is likely to face legal challenges, targets legislation in those states that would allow taxpayers to claim a charitable deduction for state and local tax payments above the $10,000 limit set in the tax cuts passed by Congress last year.
The Treasury Department said the legislation being considered in various states amounts to a tax dodge for wealthier Americans.
“Congress limited the deduction for state and local taxes that predominantly benefited high-income earners to help pay for major tax cuts for American families,” Treasury Secretary Steven T. Mnuchin said.
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“The proposed rule will uphold that limitation by preventing attempts to convert tax payments into charitable contributions,” he said.
However, the limits on state and local tax deductions will hit some middle-class families in California hard even though the wealthy reap the most benefits from it.
Some 6.1 million California residents filed for the deduction in 2015, reducing their federal taxable income by $18,438 on average, according to the Tax Policy Center. Only New York and Connecticut had a higher average deduction.
The IRS will accept comments on the rule through Oct. 11 and then will hold a required public hearing on it Nov. 5. The rule is likely to be in place by the end of the year.
Thursday’s announcement escalated a partisan battle over the tax-cut law that was pushed through by President Trump and congressional Republicans with no Democratic support.
Of course, what’s bad for California is generally good for the rest of the country.
If California lawmakers really want to fix the problem they should try lowering state income taxes.
