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Tax Deduction Trick Leaves Punitive Rates in Place

Monday January 15th, 2018   •   Posted by K. Lloyd Billingsley at 11:50am PST   •  

As we noted, the new federal tax bill caps the amount state taxes filers can deduct on their federal return at $10,000. That displeases California’s senate boss Kevin de Leon, whose Protect California Taxpayers Act will allow Californians to pay their state income taxes as though they were a charitable donation, and therefore fully deductible. The money would go into a California Excellence Fund run by the treasurer’s office and then into the state budget. Assemblyman Kevin Kiley has a different plan.

“California should allow taxpayers to deduct their full federal tax liability on their state tax return – the state and local tax deduction (SALT) in reverse,” writes Kiley. He plans to introduce the “Prosperous Economy and Payer Protection through Equitable Rates Act,” which he claims will keep Californians from leaving the state and stabilize state finances. The Act might be of some help but its chances of passing range from slim to none. On the other hand, like de Leon’s scheme, the plan leaves a basic reality unchanged.

California deploys the highest rate of income tax of all 50 states, a full 13.3 percent, and the highest base sales tax at 7.5 percent. Nobody in state government considers whether these punitive rates might be too high, and that a plumber in Fresno should not have to pony up an extra 7.5 percent when he buys a new wrench. For California’s ruling class, high taxes, onerous regulation and ever-expanding government are always a good thing. Governor Jerry Brown evangelized relentlessly for the highest income tax, highest sales tax and the new $5.2 billion gas tax. That will penalize virtually every California worker, but Brown calls those who don’t like the tax hike “freeloaders.”

Assembly speaker Anthony Rendon is not pushing for tax relief but he is dealing with federal-state conflicts in a different way. At the outset of a recent trip to Mexico, Rendon said, “California resists isolation and is willing to step up and work with Mexico if the federal administration abdicates that responsibility.”

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January 2018