- When you are devious by nature, have your bureaucracy do your wet work
- Tax bill sense
- Delicious skewering of California reaction to new tax law’s fairer treatment of other states
- It’s actually a progressive tax on their state’s rich — what’s not to like??
- But their clever reaction may be to make their state income taxes voluntary and supposedly deductible. Other states don’t have them at all, or keep them low, but why do that!
End to Obama’s Operation Choke Point
Rather than upfront attempt to regulate a legal industry (some deserve particular regulations) because favored industries might be impacted, do it one-step removed . . . define an industry in nefarious terms and put requirements on their necessary use of financial arrangements and regulate or intimidate the financial service providers. Forwarded by our southern correspondent DK :
Obama said he was going to change America and this sure as hell was a part of his perverted effort. Trump just killed this, and I applaud him for it since very few people even knew it existed. These are the things a good President should do without being coerced. And he did.
In case you weren’t aware of this onerous “thing” Obama and his leftist minions created, (now ended) here it is explained fully.
The much deserved end of Obama’s Operation Choke Point
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Democrat tax law lies, distortions and non-sense
This succinct description of the Republican tax bill is a useful rendition providing important and succinct perspective. From Bruce Bialosky writing at Townhall:
The New Tax Bill in Simple Terms and Without the Snarky Comments
Managing Editor Samuel Taube at Investment U offers this Forward Guidance, a walk through by Matthew Benjamin about key provisions affecting most people.
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More delicious news from land of fruit and nuts
From Steven Greenhut writing at American Spectator: (excerpts)
I’ve routinely slammed California’s Democratic leaders for their plodding lack of creativity in dealing with the state’s many crises. Pick a problem (infrastructure, poverty, housing, etc.) and they have the same basic solution: Raise taxes, expand a bureaucracy, and give the government more power and money to “do something.” It would never dawn on them that the biggest problems are in the areas where they’ve intervened the most.
But it’s time to give credit where it’s due. Their latest ploy to derail the recently passed Republican tax law may be indicative of the leadership’s unhealthy obsession with the Trump administration, but it does display a remarkable level of creative policymaking. It’s bad news, but it must have taken some real thought to concoct the scheme. The idea is to rename state tax payments as “charitable contributions” to get around new limits on state tax deductions.
Spectator readers know about the many advantages of the GOP tax bill, which lowers tax rates and is likely to give the economy a boost. They also know about its disadvantages. Namely, it will increase the federal deficit given that no one — from either party — ever tries to cut federal spending. For those of us living in high-tax states, it also has the disadvantage of capping our state and local tax deduction at $10,000 rather than an unlimited amount. The average deduction was $22,000, reflective of the highly progressive nature of the state’s tax system.
That will hurt many Californians, some of whom tried to get around it temporarily by pre-paying their tax bill before the New Year’s holiday. But legislators arrived back in Sacramento this week and announced a plan that’s designed to help all Californians who itemize their deductions get around these lowered deduction limits. It’s a doozy.
Under the still-emerging proposal, Californians would be able to donate their money (above the $10,000 cap) to special state charitable funds and get a 100-percent tax credit in return, based on news reports. Essentially, they would be “donating” money to the state as a charity rather than paying their taxes to the state government. The whole switcheroo is undermined by one little thing: If you don’t make this “charitable contribution,” you will be forced to pay it anyway.
As my R Street Institute colleague Ian Adams pointed out regarding the IRS guidance, “States actually do qualify as organizations to which individuals can make charitable contributions for purposes of a federal income tax deduction.” But it’s “not clear that compulsory charity is, in fact, charity since the very concept requires the act to be voluntary.”
The San Jose Mercury News interviewed experts who argue that the plan isn’t much different from what states already do. Some conservative states offer tax credits “to those who funnel money into state funds for private school vouchers” and some liberal states “use tax credits to promote environmental conservation and college scholarship donations,” according to the newspaper. But this new proposal is dubious. The above-mentioned credits divert money to actual programs and there’s some level of choice (by individuals or legislators) in targeting particular programs. The SALT-related “charitable” proposal (State And Local Taxes) doesn’t send any money to a charity or even to any programs in particular. It’s just a way to game the tax system.
Ironically, this idea is about helping the wealthy, who get additional reductions in the new law to compensate for the losses anyway. That would seem odd for the Democrats, but it’s mainly a poke at the Trump administration. Why should the rest of the country get dinged to compensate for our ridiculously high state tax rates? Like everything else, this plan likely will work its way through the courts provided the Legislature can pass something soon and the governor — also a leading light in the Trump Resistance — signs it. . . .
AS readers have some delicious points about the California tax scam efficacy. From their comments: (excerpts)
oldeham Brian B • 3 days ago
Bingo. The state, county and local municipalities are not legally a tax exempt entity by federal law. Are there any real lawyers left in CA or just ambulance chasers.
Smedley Frockmorton
. . . I suspect that the IRS can handle this easily by declaring the value given back as taxable income. It will be a tax-neutral event.
Igor
. . . What part of “Federal Law supercedes State Law” don’t most people get??
vagrant55084
I work for a non-profit, and if we give you a teddy bear for a $50 donation, we have to provide the fair market value of the bear on the receipt, because you can only deduct the value of the donation above any benefits received in return. $10,000 “given” to the state in exchange for the benefit of a $10,000 tax credit would equal exactly $0 deductible on federal taxes. This does not appear to be a grey area.
Al Adab
A clear demonstration that to the Leftist mind, the government is a charity organization dedicated to the confiscation and redistribution of wealth and to the promulgation of social welfare schemes. As such, it is only natural that they see taxation as voluntary contributions to their “charity” system.
M S 12345mk
there is much confusion about prepaid taxes. But the IRS has issued an advisory that prepaying future taxes is a mistake. And many people (and a few states) think that by prepaying 2018 obligations in 2017, they can deduct them on their 2017 federal returns. This would be tax evasion and the IRS should prosecute these people.
The benign case of people prepaying their 2017 state and local property taxes is different, and merely represents smart and legal management within the tax rules. This type of prepay is a non-issue. The issue is whether people could prepay 2018 property taxes in December and deduct on their 2017 returns, which would be fraud.
M S daialanye • 2 days ago
. . . It isn’t illegal to avoid taxes by legal means – a tautology. The question is whether prepaying 2018 property taxes and deducting them on 2017 returns is legal. The IRS says no.
And lawyers will have a windfall sorting this out. But then, lawyers always seem to benefit. But those who prepaid their 2018 property taxes should not.
Patechinois
. . . California can’t direct the IRS to change their forms and tax calculations to allow for Californians to deduct their state tax above the allowed amounts. The IRS will look at any form that attempts to take more than the $10,000 allowed (using “charitable contributions”) and flag it for correction…and oh wouldn’t it be funny if it flagged it for AUDIT. haha! I wonder how many Californians would risk tempting the IRS to look further into their tax forms. The only way California can give tax relief to their people is to reduce their own state taxes.
Mr_Bramse
. . . when I claim a deduction, ie charity, the IRS is concerned that it is a legitimate deduction. By law if you get something of monetary value in return the value of whatever you received must be claimed. So as an example, if you gave $500 to a charity raffle and won a $500 prize you can claim the $500 deduction, but must also claim the $500 prize, the net result being $0.
glen.hoffing
If they are really concerned about “double taxation” why don’t they simply allow a state tax deduction for federal taxes paid? (V’pac ed note — ‘cuz that would actually reduce state taxes_
Strider73
Six states (AL, IA, LA, MO, MT & OR) allow that deduction, but the last three impose limits.
dleeper47 • 3 days ago
Yeah, right — a “mandatory charitable contribution” is an oxymoron. The IRS will simply disallow the “contribution”, notify the taxpayer of additional tax due, plus interest, plus penalties. And that will be the end of it. Those who don’t pay up will be liable for prosecution for tax evasion.
California might declare any state tax liability above $10,000 to be “optional” and therefore voluntary. But I don’t see Moonbeam doing that, not ever! It would be fun to see how many California leftists would actually put their money where their mouth has been and pay the extra tax.
Direwolf
But I thought the wealthy Left WANTS to pay more taxes, that they are not being taxed enough. Oh, that’s right, Trump’s in office and taxes to government are “going to line his family’s pockets, blah, blah, blah.” For a bunch of relatively creative people, Californians can sure be sold a unicorn in a heartbeat.
HRR
Don’t the dems believe ‘the rich’ are not paying their fair share? So why are they now upset that the ‘the rich’ will be paying more? They would do better to just take a position and stick with it.
ruserious
why not make all calif tax a contribution? They could then claim they have no state tax like TX. Shoot lets make car registrations and tolls and state gas tax and park fees a contribution too. Sarcasism intended.
Jeff OConnor
Some Californians get a great return on their taxes. State and Local government employees are hideously overpaid, so they do ok. Then they retire to Oregon. Hell, some of them live there on the weekends. Most citizens have no idea what they are paying for. The only solution to the problem is complete collapse, otherwise it is unsolvable. So they want me to bail them out? I have a one-finger answer.
I wonder how the California tax authorities will treat non-paying “donators.” I mean if I don’t donate to my local Church, no one from the Dept of Revenue shows up at my door to hang a fluorescent tag on my door stating “SEIZED FOR NON-PAYMENT OF CHARITABLE PAYMENTS”
Patechinois
So California is going to tell its people to go ahead and risk an IRS audit by claiming anything Californians pay over $10,000 in state and local taxes is a “charitable” contribution on their IRS tax forms. Go ahead, make the IRS’ day!
Junior Sampals
The real problem as I see it is that California has raised state and local taxes so high that they now depend on the other 49 states to subsidize Californians. Up yours California.
Why should the rest of the country be penalized and taxed so that Californians can get a big fat tax refund based on their inflated property values, sky high advolum taxes, and state income taxes? I didn’t sign-on to be a pressure release valve for Sacramento.
conservativeprof
This scheme will not work as many posters indicate. The “donation” is not voluntary as taxes will be forcibly extracted if not made. There is nothing donated as compensation is received for the donation. State agencies are not charities. Rich CA lefties enjoy paying taxes so this bill addresses a non problem. The rich CA lefties will be happy to pay a higher level of taxes.
R Mall
