West Maui Taxpayers Association
  • HOME
  • Olowalu Fire Station
  • WMTAPAC22
  • Affordable Housing
  • West Maui Lifesavers
  • Wall of Honor
  • Support WMTA
    • Membership - One Time Payment
    • Membership - Recurring Payment
    • Donations
    • Wills & Trusts
    • Charity Walk
  • Newsletter
  • Emergency Planning
  • News Blog
  • About Us
    • Goals & Objectives
    • Accomplishments
    • Board of Directors
    • WMTA vs WMIF
  • Contact
  • Subscribe

The California Stupidity Fund

3/26/2018

 
WMTA Shares these commentaries, without taking a position unless otherwise noted, to bring information to our readers
​To view the archives of the Tax Foundation of Hawaii's commentary click here.
 ​​​​​​​

Weekly Commentary

For the Week of March 25, 2018

The California Stupidity Fund
By Tom Yamachika, President
 
One of the changes that was made in the Tax Cuts and Jobs Act of 2017, which applies to our federal tax returns for this year, is a limitation on deductions for state and local tax.  Simply put, you can only deduct up to $10,000 in state and local tax. If you paid more, too bad, tough cookies.  (This limitation applies only to non-business taxes. If you have a business and it pays taxes, such as our state GET, those taxes are fully deductible.)

Some government officials in high-tax states, such as California (which is now one of the only states with a higher income tax rate than ours), were not too happy about the limitation.  California is now trying to enact a workaround, and some Hawaii lawmakers are actively considering similar legislation.

Specifically, the California Senate has passed a bill that establishes a “California Excellence Fund” that will accept contributions from people.  The fund will be used to fund public works and other government projects, and Californians will get an 85% tax credit for amounts contributed to the fund.  So, for example, if you owe $85,000 in California tax and you contribute $100,000 to the fund, an $85,000 credit is generated so you no longer owe money to the state.  If the taxpayer gets a charitable deduction for the $100,000, the taxpayer would get much more benefits because there is no limit on deductions for giving to charity.

Our advice on doing the same thing in Hawaii:  three words.  It. Doesn’t. Work.
The main reason why it doesn’t work is that taxpayers who get a benefit, or something of value, from a charitable donation can only deduct the difference between the money they paid out and the benefit they got in return.  That’s why a taxpayer who buys tickets to a benefit dinner for $100, for example, gets a letter from the charity saying that the dinner was $30, so the taxpayer can deduct the $70 difference.

In the California Excellence Fund example, the taxpayers who “donated” $100,000 were able to avoid paying $85,000 that was otherwise owed to California.  Relief from debt is a benefit to the taxpayer just like the meal in the benefit dinner, so the taxpayers in that example will have a deduction for contributions of $15,000.  They don’t owe California tax now, so there is no state tax deduction.  They are, in fact, worse off.  If they instead paid their tax and gave $15,000 to another charity, they would get a $10,000 state tax deduction and a $15,000 charitable deduction.  That way they could write off $25,000 for the same cash outlay.

In January, while the California Senate was considering the scheme, some alert reporter asked Treasury Secretary Mnuchin about it when he gave a press briefing on other issues.

His reaction:  “Ridiculous.”

Although we are in the process of selecting a new commissioner of the Internal Revenue Service, whoever it is will report to Mr. Mnuchin.  So, it’s probably safe to assume that the IRS will take a dim view of the California Excellence Fund contribution scheme.

Given all of that, what do you think about establishing a California Stupidity Fund here in Hawaii?
​

Comments are closed.
    Picture

    RSS Feed


    If you wish to further discuss blog posts, please contat our office directly or contact us via Contact page.

    Categories

    All
    Affordable Housing & Homelessness
    Board
    Capital Improvements
    Charity Walk
    Commentaries
    Community Events
    Community Resources
    CON
    COVID 19
    Educational
    Emergency Planning
    Health & Safety
    HHARP
    Housing
    Infrastructure In West Maui
    In The News
    Kapalua Airport Runway Lights
    Kapalua Coastal Trail
    Lahaina Bypass
    Legislature Newsletters
    LLC
    Long Range Transportation Plan 2040
    Long-Range Transportation Plan 2040
    Makila
    MAUI CANCER CENTER
    Maui Cancer Center Llc
    Maui County
    Maui County Budget
    Maui County Dept Of Environmental Management
    Maui County - Dept Of Water
    Maui Destination Management Plan
    Press
    Public Safety In West Maui
    Real Property Tax
    Recycling Info
    TAT
    Tax
    Tourism
    Traffic & Roadways
    Transportation
    Video
    Vote
    Voting
    West Maui Community Plan
    West Maui Hospital
    West Maui Skate Park
    WMTA Annual Meeting
    WMTA Breakfast Events
    WMTA Candidates Night
    WMTA Disaster Preparedness
    WMTA Fundraisers
    WMTA Hot Topics
    Wmta Hot Topics Replay
    WMTA Membership
    WMTA PAC
    WMTA Sunset Sail
    WMTA Whale Watch

Quick Links: 

Home

News

About Us

Wall of Honor

Newsletter

Support WMTA
Emergency Planning

Contact

Copyright © 2021
Photo used under Creative Commons from wolfsavard
  • HOME
  • Olowalu Fire Station
  • WMTAPAC22
  • Affordable Housing
  • West Maui Lifesavers
  • Wall of Honor
  • Support WMTA
    • Membership - One Time Payment
    • Membership - Recurring Payment
    • Donations
    • Wills & Trusts
    • Charity Walk
  • Newsletter
  • Emergency Planning
  • News Blog
  • About Us
    • Goals & Objectives
    • Accomplishments
    • Board of Directors
    • WMTA vs WMIF
  • Contact
  • Subscribe