California Republicans can’t stop talking about the state gas tax increase and how it’s supposedly hurting their constituents.
But they’re somehow silent about the Trump-GOP tax law that will increase federal income taxes on 1 million Californians next year.
That’s right: Increase.
You may have missed it, what with President Trump abruptly, but not surprisingly, canceling his summit with North Korean leader Kim Jong Un while he’s also flogging baseless accusations of an FBI “spy” in his 2016 campaign.
But on Wednesday, the Internal Revenue Service strongly hinted that it will nix a workaround that legislators in California and other higher-tax Democratic states are attempting to offset a new limit on deductions for state and local taxes.
Under the sweeping tax law passed in December, those itemized deductions are capped at $10,000. The average claimed by Californians is nearly double that. So the state Senate passed a bill in January that would allow taxpayers to make a charitable contribution to the state in return for a tax credit to offset the lower deductions.
The IRS, however, says it will soon issue regulations that it warned “will make clear that the Internal Revenue Code, not the label used by states, governs the federal income tax treatment of such transfers.” In other words, the charitable donation maneuver almost certainly won’t be allowed.
In 2015, 2.6 million California taxpayers claimed more in state and local taxes than the $10,000 cap, according to the Franchise Tax Board. Of them, 1.5 million should still pay less next year due to other changes, and about 100,000 will owe about the same, the board estimates.
But the other 1 million will owe Uncle Sam a combined $12 billion more. That’s more than double the $5.2 billion a year from the gas tax and vehicle fee hikes.
While doubling the standard deduction will lower federal taxes for many Californians, those savings are a pittance compared to the huge windfall going to corporations. After handing out some highly-publicized bonuses to workers, companies are now using their tax savings to buy back stock and reward investors – not to raise salaries or create new jobs.
Despite those facts, Congressional Republicans who backed the punishing tax law are now cynically helping to fund a measure to repeal the 12-cent gas tax hike, hoping it will gin up their vote in November and stop Democrats from flipping U.S. House seats. Republicans also know that the higher income taxes hit hardest at more affluent residents in Democratic strongholds.
If the repeal succeeds, Californians will have to drive on worse roads. They will also be affected by federal budget cuts to avoid huge deficits caused by the tax law. And, of course, a million of us will owe more in U.S. taxes.
That’s hardly a good deal, no matter how Republicans try to sell it.