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California Fights Republican Tax Reform

Saturday, January 13, 2018 0:17
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By Douglas V. Gibbs

Author, Speaker, Instructor, Radio Host

The Democrats control California’s legislature, and they hate President Donald Trump.  The new Tax Reform law puts a cap on state and local tax deductions, and California is considering re-classifying State taxes as charitable contributions so that that can get around President Trump’s new tax reform.

Governor Jerry Brown calls the GOP Tax Reform law and “evil in the extreme,” and called the Republicans out for “acting like a bunch of Mafia thugs.” California Senate President Pro Tem Kevin de León (D-Los Angeles) snarled, “Republicans in Washington have once again zeroed in on California to punish us and make our state the single biggest loser in their reckless tax scheme.”

The purpose of removing the deduction of State taxes from the federal tax law was to expose the high income tax States for who they are, and to eliminate federal subsidies for the outrageously high tax rates.

De León is promising to introduce legislation allowing California’s highest income earners to continue deducting 100 percent of state and local taxes over the $10,000 limit by renaming them charitable contributions.

IRS Publication 526, which defines what qualifies for federal charitable contribution deductions, specifically allows deductions for “federal, state, and local governments, if your contribution is solely for public purposes (for example, a gift to reduce the public debt or maintain a public park).  The Democrats in California seem to think renaming State income tax a charitable contribution fits that definition.  If they do this, I have a feeling a lawsuit will emerge quickly to give the federal courts a chance to interpret what the IRS code really means – from their point of view.

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