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In a recent article published by the Orange County Register, they reported that:
California Democrats are toying with a brash scheme to skirt a new federal cap on state and local tax deductions: Instead of paying taxes to the Golden State, Californians would be allowed to donate the money to the state’s coffers — and deduct the entire sum from their federal taxes.
California lawmakers are considering a tax credit of 100 percent for the proposal — essentially allowing people to replace their tax payments with donations to a state fund.
The average state and local tax deduction for California filers — including income and property taxes — was $22,000, according to the state Department of Finance. The new federal law caps that deduction at $10,000, less than half of that amount.
Even though Democrats like Senate leader Kevin de León, also a candidate for U.S. Senate against fellow Democrat Dianne Feinstein, wants to portray himself as a champion of the people and the tip of the spear of the California anti-Trump resistance movement. In reality, his true intentions are to give a massive tax loophole for millionaires and billionaires.
Here is the truth. For most middle-class families they will not see their taxes go up. With increases in the child tax credit and the standardized deduction, many will benefit from the GOP tax plan; even in California.
Protecting the 1%
So who are the Dems and Kevin de León trying to protect? It’s the millionaire and billionaire class.
Do you think everyday middle-class families have their CPA or tax consultant continually running numbers and doing their accounting to make sure they donate the proper amount on or before December 31st?
Of course, they are not. You can’t go to your tax professional at your local H&R Block on April 15th and “supposedly donate” for the prior year. It doesn’t work that way. This plan is to protect as Bernie Sanders likes to say, the 1%.
The average family, Kevin de León is saying he wants to protect is a lie. They can’t afford the supposed tax hike, but can all of a sudden afford to pre-pay tens of thousands of dollars before the year-end to avoid paying higher federal taxes.
This is political grandstanding at its finest by Kevin de León. He wants to deceive voters into a narrative that he is a champion of the people and the leader of #Resist. Unfortunately for him, we know he is the same champion of the people that raised taxes on poor and working-class families in California with his gas and car registration tax hike.
So sorry Kevin, whatever you’re selling, we ain’t buying.
The Truth
Here’s the truth. California is highly dependent upon high-wage earners. Especially those millionaires and billionaires who invest in the stock market and have to pay hefty capital gains taxes. It might seem that these millionaires and billionaires would prefer to go to a state like Texas. Since they are so successful and business savvy, why pay higher taxes in California?
Well, the truth is, they are going to have to pay high taxes anywhere they go. They can go to a place like Texas and pay less to the state and more to the federal government or live in the Golden State and pay that money to the state instead of the federal government. You’re paying that money in taxes anyway, do you really care which government agency it goes to?
Even though it might be cheaper with the cost of living and purchasing power between a state like Texas and California, to live in Texas over California, but for many, it is worth it to live in one of the most desirable places in the world and pay a bit more.
Remember these people are not living paycheck-to-paycheck, unlike many struggling families in California. They can afford it.
I understand this as a California resident that happens to live in a more affluent area. I pay a premium to live where I live, but it is worth it to me. I don’t want to move or live in another state or for the most part another region of the state. I love where I live.
But the thing is I’m not a 1%er, and it isn’t for lack of trying; it’s just reality. I’m single with no dependents, and I am in the upper-middle class, so I have a higher amount of disposable income that makes it possible to live in California. I don’t have to deal with the realities of struggling working-class families.
The Reality
So even though the GOP tax plan will benefit the majority of California families., the reality is for the 1% the GOP tax plan will hurt those high-wage earners living in a high-taxed state like California. The extra tax liability to these taxpayers could be in the millions.
You see, the 1% might be okay with spending tens of thousands of dollars more to live in California but what do you think will happen when their CPA comes back and says, Mr. & Mrs. 1% you owe an extra $10 million in taxes this year because you live in California.
You might get, let’s buy a house in Florida or Texas and live there for six months and one day and then the rest of the time in California and save $10 million a year. Or let’s just leave California altogether.
You see California Democrats don’t like the new tax policy because now they will have to compete with other states. You see California Democrats like Kevin de León knew they could kick the can down the road with their terrible policies and get away with high taxes, reckless spending, taxpayer handouts to their corporate and union contributors under the old tax code.
Now that the gig is up, you see Democrats trying to give these millionaires and billionaires a massive tax cut loophole in the hopes of keeping them in California.
California Democrats need to realize that this scheme will not work and with a tax deduction over a tax credit on the federal side, which will be the feds countermeasure, or not recognizing it as a charitable deduction, it will still be economically advantageous for millionaires and billionaires to move. Just like it has been for the tens of thousands of working-class families that have left the state because of reckless economic policies.
If we don’t seriously address the high tax and reckless spending policies of the state, we will see a steady if not a rapid decline in California’s general fund and thus result in even higher state taxes and deeper cuts in services. Along with accelerating our looming pension crisis.
We have serious problems in California and we need serious people to fix these problems, instead of political grandstanders.
If California, wants to be competitive it needs to embrace fiscal responsibility. No other scheme or ploy will do.
Konstantinos Roditis is a candidate for California State Controller. You can learn more about his campaign at cacontroller.com, and you can follow him on Twitter & Facebook as well.
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