by Brian Leubitz
Well, now that the dust has settled a little bit on the mess that is the GOP tax plan, some are looking to find ways to react to the changes. Of course, given that this is California, and we have state taxes that will no longer be deductible in 2018, that has been one of the bigger targets. Some have suggested reclassifying taxes as charitable contributions (seems a little iffy legally), and urging state residents to prepay property taxes (temporary, but on solid legal footing.) But the biggest question would be the state income taxes that Californians will no longer be able to deduct, and apparently there is a plan for that:
But perhaps the most promising option, teased by a large group of tax law experts and vocally championed by prominent liberal economist Dean Baker, is for states to repeal their income taxes and replace them with employer-side payroll taxes. This might appear like a minor technical change. But it would not only totally offset the new limit on deducting state taxes — it would amount to a sizable tax cut for many middle-class families and would vastly simplify tax preparation by freeing people up from filing their own state taxes.(Vox)
And, long-time Calitics writer David Dayen says that this is actively being considered in Sacramento:
I know for a fact that California is looking seriously at this
— David Dayen Pass-Through Vehicle LLC (@ddayen) December 26, 2017
This is still a very preliminary idea, with a whole lot of details to be considered. This could be a win-win for Californians, and a nice little middle finger to the Republicans in DC. Also, with all of the measures that have been passed dealing with income taxes, this will almost certainly need to go to the ballot even if we get 2/3 in the both chambers of the Legislature. And this could be the opportunity to fix Prop 13 along with the rest of our tax system.
If it is crafted well, the only loser will be the federal government, most Californians will get a tax cut from this switch, and state taxes will be easier. Some California Republicans had been arguing that their tax bill would force the state to lower taxes, but not sure if this is what they had in mind. I suppose it will be interesting to see if the Republicans in Sacramento are interested in joining Democrats in reforming our own tax system. To be honest, given the headaches of Prop 13 and the boom-bust income taxes, some tax reform here is probably over due.
Even if this goes through, the federal government will have to react to the changes at some point down the road. But given that they would likely need Democratic votes, perhaps we arrive at a more balanced place of action. Or at least until 2018 changes things.