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A possible solution to the Tax overhaul for California residents

January 3, 2018

From Carla Marinucci this morning : facebook – excerpt

THE BUZZ: With the Legislature reconvening in Sacramento today, we’re getting our first clear picture of how state Senate Democrats will move to blunt the effects of Washington’s tax overhaul. State Senate leader Kevin de León is preparing legislation, dubbed the “Protect California Taxpayers Act,” that would let California taxpayers make charitable donations to a state government fund – the “California Excellence Fund” – in exchange for a dollar-for-dollar tax credit. The contributions taxpayers make can be deducted on their federal tax returns, bypassing the new limit on state and local income tax deductions.

— There’s some precedent for this kind of maneuver. The Legislature in 2014 passed a bill providing a tax credit for contributions make to the state’s Cal Grant program, based on some of the same legal arguments scholars consulting with high-tax states are making today. But credits were capped under that legislation (also a de León bill). The legislation the state Senate leader is considering now would credit contributions at 100 percent.

— Expect de León to introduce the bill any day. One unresolved question is whether state Senate Democrats will move the legislation as an urgency measure, allowing it to take effect this year. If so, they’ll face a two-thirds vote threshold. Also worth watching is how Republican lawmakers handle the proposal. It’s a bill that stands to benefit taxpayers across the state. But it’s also a direct rebuke of President Donald Trump and the Republican-held Congress.


Will California outmaneuver a new federal cap on tax deductions?

…Another work-around contemplated by tax scholars and blue-state politicians is even more complicated: replacing state income taxes — which are subject to the $10,000 cap — with employer payroll taxes, which are not. But that idea would almost certainly require employers to cut employee salaries, a move with wide-ranging implications….(more)

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