Four “blue states” are developing a federal tax cut plan that will ease the burden of their citizens – already net donor states to the federal government – from the Trump tax increase plan that Republicans enacted in December.
The GOP tax scam bill capped so-called SALT (“State and Local Tax”) deductions at $10,000 per tax filer, which disproportionately impacts high tax states who tend to vote for Democrats.
That’s why the states of California, New York, New Jersey and Maryland are moving to allow certain charitable contributions to count towards state tax payments and to switch employment taxes from earners to companies in order to mimic the prior federal tax deductions. CNBC reports:
“We’re attempting to come up with ways to negate and blunt the harsh and unfair Republican tax policy,” said Kevin de León, the Democratic leader of the California State Senate.
Some of the ideas include granting a charitable deduction — which remains uncapped — after filers pay property taxes. Another idea does away with income taxes and applies a statewide payroll tax to be paid for by employers — which is deductible to them. “The whole intent is to ensure that you get the benefit of the deduction you would otherwise lose,” said Joseph Bankman, the Ralph M. Parsons Professor of Law and Business at Stanford Law School.
In 2015, the average New Yorker’s SALT deduction was more than $22,000. In New Jersey and California, those deductions were around $18,000, while Marylanders claimed an average deduction of nearly $13,000. Starting this year, the Tax Cuts and Jobs Act, the recently enacted federal tax overhaul, caps payers’ deductions on their property, state and local income taxes (SALT) at $10,000.
California’s plan uses donations to the state-run charity called the California Excellence Fund, which would require residents to plan their taxes in December rather than April to take advantage of the deduction.
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New Jersey is adopting an approach similar to California’s charitable donation deduction scheme.
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Maryland would build on California’s ideas and add an increased Estate Tax by lowering the threshold for taxation back down to $5 million per individual from the new $11 million federal exemption while maintaining personal exemptions from state taxation.
New York’s plan would combine those approaches along with flipping wage-based taxes from employee paid to company paid, where they’re still deductible under the federal tax code. Employees would make the exact same take-home pay but obtain a net reduction in taxable income as a result.
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Republicans agreed to add at least $1.5 trillion on to America’s long-term deficit – after prior lives as deficit hawks – while totally ignoring the kinds of real-world countermeasures that states would take to correct the GOP’s plan to strangle Democratic states with double taxation.
Now, it will probably take a Democratic super-majority in Congress and a new President to undo the mess Republicans have made in our country’s income tax system.
