How does one start a petition drive for a CA state "tax reform" in lieu of SALT caps?

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Submitted by flu on December 20, 2017 - 6:41am

Does anyone know or have experience with starting a CA state tax "reform" petition? For example, recently there's a petition to repeal gas taxes... How does one setup/start a similar tax relief petition?

As you already know, with the federal tax reform, folks in high cost states such as CA, NY, NJ are going to be seeing their federal taxes change with the cap on state and local tax (SALT) deductions.

What I would like to do is get some state representative to sponsor a CA state tax reform bill such that CA state and local governments expand state "charitable organizations" and provide a near dollar-for-dollar state tax credit for contributions to "qualified" charitable organizations.

So for example, if you owe $1000 in state taxes, but donate $1000 to a qualified charitable organization(s), you get a $1000 state tax credit and owe $0 in state taxes.

In effect, this would shift the tax deductions of CA tax payers from SALT deductions (which is currently limited to $10k with it and property taxes) to "charitable contributions", which the federal tax code does not limit under both normal tax rate and (as an added bonus for folks that currently pay AMT taxes) does not get AMT limited (unlike SALT deductions which are also AMT limited)....

From CA state/local government perspective, they get relatively the same money, whether it's from a direct tax payment or from charitable contributions. But as a CA tax payer, this would get around the SALT cap. This might even allow the CA state to have net positive than previously, because for example, if they offered a 80-90cents to $1 tax credit:donation, a CA state tax payer might still opt that option, because they end up making up the different in the federal taxes they save....

This concept is not out of the realm as possibilities, because as SK pointed out on another thread, some states such as Arizona already have similar ideas in place, although there's a limit on the state tax credit...

https://www.sensiblemoney.com/learn/ariz...

I'd like to bring this up to at least some of our state/local government officials, at least in principal....as a way of giving the finger to some parts of the tax reform.....

Submitted by SK in CV on December 20, 2017 - 7:24am.

I think you skipped a step in your explanation. The qualifying charitable organizations should be organizations that are already getting state funding. Like schools. Arizona has some that aren't currently funded by the state (like private schools, whose funding I personally strongly oppose, and would hate to see California include them in qualifying organizations). But most of the organizations are things the state is either already funding or reasonably could fund. I do not know whether the state reduces funding based on the amount of direct contributions, but there are some credits that are limited in total dollar amount.

Submitted by flu on December 20, 2017 - 7:53am.

SK in CV wrote:
I think you skipped a step in your explanation. The qualifying charitable organizations should be organizations that are already getting state funding. Like schools. Arizona has some that aren't currently funded by the state (like private schools, whose funding I personally strongly oppose, and would hate to see California include them in qualifying organizations). But most of the organizations are things the state is either already funding or reasonably could fund. I do not know whether the state reduces funding based on the amount of direct contributions, but there are some credits that are limited in total dollar amount.

Fair enough.... Anyway, this is just a big game....Consider it a hobby, outside of when I'm driving. I just think it's interesting how people's fortunes can change simply by a few line item changes.

A few weeks ago, a few folks bent out of shape concerning the tax reform was pondering could could the state strike back at these tax reforms....

In principle, here's a strategy that might work. Where are all you folks that want to effect change and want CA to screw the fed back? Are you going to help ask our state representatives to do something? SK is in Arizona, so his state already does something about it... He's excused :)

Submitted by SK in CV on December 20, 2017 - 8:09am.

If I was a state legislator, I wouldn't frame it as screwing the fed. It's benefitting the taxpayers of California without costing the state any revenue, or costing any currently funded organization. Taxpayers who are tax aware can save some money. Tax advisors score.

Submitted by spdrun on December 20, 2017 - 8:09am.

How to make sure that the money donated to charity is distributed equitably? What if United Way gets 90% of the donations and ends up with money it can't use, and Podunk Unified School District ends up with zippo squat?

Would "approved" charities have to spend their money in a specific way or in specific (and multiple) places to guarantee that it's distributed throughout the state?

Submitted by SK in CV on December 20, 2017 - 8:48am.

Give the money directly to the school district or even school. That's how AZ does it. The tax credit form requires that you specify the school or school district. In fact, you can even specify the program within the school to get the funds. I send $400 (almost) directly to my niece's classroom. She gets to have aids in her 16 kid, all non-verbal, special ed classroom because of the money she raises. I get credit exactly (for me anyway, there are limitations) like an estimated tax payment on my AZ return and a charitable deduction on my federal return.

Submitted by spdrun on December 20, 2017 - 9:15am.

What if everyone donates to school districts in San Francisco but very few donate to districts in Stockton?

Submitted by outtamojo on December 20, 2017 - 9:45am.

flu wrote:
SK in CV wrote:
I think you skipped a step in your explanation. The qualifying charitable organizations should be organizations that are already getting state funding. Like schools. Arizona has some that aren't currently funded by the state (like private schools, whose funding I personally strongly oppose, and would hate to see California include them in qualifying organizations). But most of the organizations are things the state is either already funding or reasonably could fund. I do not know whether the state reduces funding based on the amount of direct contributions, but there are some credits that are limited in total dollar amount.

Fair enough.... Anyway, this is just a big game....Consider it a hobby, outside of when I'm driving. I just think it's interesting how people's fortunes can change simply by a few line item changes.

A few weeks ago, a few folks bent out of shape concerning the tax reform was pondering could could the state strike back at these tax reforms....

In principle, here's a strategy that might work. Where are all you folks that want to effect change and want CA to screw the fed back? Are you going to help ask our state representatives to do something? SK is in Arizona, so his state already does something about it... He's excused :)

Imo the best way to screw back is to get folks more riled up about their lies and vote them out of office #whereismyraise

Submitted by livinincali on December 20, 2017 - 10:40am.

spdrun wrote:
What if everyone donates to school districts in San Francisco but very few donate to districts in Stockton?

That's why the credits would need to be limited to some dollar amount like Arizona does. Obviously the state still needs to receive money and allocate to various programs and services throughout the state. It could never function if everyone were allowed to dictate what their tax dollars are used for. At best maybe you could convert 10% of the states income tax revenue into charitable contributions for federal tax purposes before you start running into problems.

I just don't really see the path that high cost of living/high tax state can take to to relieve the sting of this tax bill. It you were itemizing your taxes because of high state tax and mortgage interest deduction and you weren't already in AMT land you're getting monkey hammered by this. If you weren't then it's marginally better.

In summary upper middle income tax payers in the West and Northeast are getting hosed to give the average middle income american $50-100 extra per month. The corporate tax breaks are going to add $150 billion a year in deficits.

The reality was that upper income tax payers are where the money is so any tax reform was going to hit them the hardest. Under a Clinton presidency maybe the truly wealthy wouldn't have gotten as much of a break and the middle class american might has gotten more, but there' no way upper middle income taxpayers weren't going to pay for it in the end.

Submitted by flu on December 20, 2017 - 11:14am.

SK in CV wrote:
If I was a state legislator, I wouldn't frame it as screwing the fed. It's benefitting the taxpayers of California without costing the state any revenue, or costing any currently funded organization. Taxpayers who are tax aware can save some money. Tax advisors score.

Yes! Exactly.. it's all is how the message is delivered. You don't want to be directly confrontational with the fed.

Submitted by flu on December 20, 2017 - 11:18am.

SK in CV wrote:
Give the money directly to the school district or even school. That's how AZ does it. The tax credit form requires that you specify the school or school district. In fact, you can even specify the program within the school to get the funds. I send $400 (almost) directly to my niece's classroom. She gets to have aids in her 16 kid, all non-verbal, special ed classroom because of the money she raises. I get credit exactly (for me anyway, there are limitations) like an estimated tax payment on my AZ return and a charitable deduction on my federal return.

Another good point. I stopped donating directly to my school district's general pool fund. I make my donations directly to the specific school's science and grade teachers classroom, complete with receipt....need a new computer to run the latest simple machine tool? done.... Just make sure you get a nice receipt.

Submitted by flu on December 20, 2017 - 11:20am.

Usually the school district then tries to adjust money from the general donation pool fund and gives more to the schools that have less contribution.

Submitted by scaredyclassic on December 20, 2017 - 11:22am.

i cant figure out if im going to pay more tax. we get hit pretty hard by AMT and the,sample calculators dont acct for that.

on the bright side, if this,depresses real estate prices, maybe my kud will be better able to buy.

Submitted by flu on December 20, 2017 - 11:59am.

Well, time to make my annual 529 contributions. Lol..m.

Submitted by flu on December 23, 2017 - 9:41am.

Looks like some politicians have caught on.... We'll see if it sticks next year.

http://beta.latimes.com/politics/essenti...

De León, who also is running for U.S. Senate, said the state Senate is working with law professors at UCLA, UC Davis and the University of Chicago to develop the legislation.

Ideas being considered, according to a de León spokesman, include:

Reducing state personal income taxes through a tax credit program and offsetting that amount through payroll taxes.
Allowing individuals to make voluntary gifts to the state of California, which would be deductible as a charitable donation under federal law. The deduction for the donated amount would replace the state and local tax deduction.

Submitted by scaredyclassic on December 23, 2017 - 10:32am.

flu wrote:
Looks like some politicians have caught on.... We'll see if it sticks next year.

http://beta.latimes.com/politics/essenti...

De León, who also is running for U.S. Senate, said the state Senate is working with law professors at UCLA, UC Davis and the University of Chicago to develop the legislation.

Ideas being considered, according to a de León spokesman, include:

Reducing state personal income taxes through a tax credit program and offsetting that amount through payroll taxes.
Allowing individuals to make voluntary gifts to the state of California, which would be deductible as a charitable donation under federal law. The deduction for the donated amount would replace the state and local tax deduction.

funny stuff.

didnt trump say he knows best how to use tax system to his,advantage

Submitted by scaredyclassic on December 24, 2017 - 9:56am.

Too Good to Be True? How State Charitable Tax Credits Could Increase Federal Funding for California
in California Policy Options (2013)

UCLA School of Law, Law-Econ Research Paper No. 13-16

31 Pages
Posted: 18 Sep 2013

Phillip C. Blackman
Independent

Kirk J. Stark
University of California, Los Angeles (UCLA) - School of Law

Date Written: September 17, 2013

Abstract
An IRS chief counsel memorandum published in 2010 found that a taxpayer was permitted to claim a charitable contribution deduction for the full amount of a gift, even thought a substantial portion of the gift was effectively refunded to the taxpayer through a charitable state tax credit. In this article, Blackman and Stark explain that the IRS memorandum permits states to adopt charitable tax credits that effectively enable taxpayers to convert state taxes to charitable gifts — a strategy that would be attractive to alternative minimum taxpayers. Those state charitable tax credits (some with extraordinarily high credit percentages) appear to be on the rise, perhaps in part because they effectively enable a transfer of revenue from the federal government to the states. The authors believe the memorandum should be repudiated (as a matter of appropriate federal tax policy), but if it is not, states should consider taking advantage of it. The article discusses how the strategy applies in the case of proposed California legislation that would permit a 60 percent tax credit for contributions to a state fund designed to increase financial support for low- and middle-income students to pursue secondary education.

Submitted by scaredyclassic on December 24, 2017 - 9:56am.

Too Good to Be True? How State Charitable Tax Credits Could Increase Federal Funding for California
in California Policy Options (2013)

UCLA School of Law, Law-Econ Research Paper No. 13-16

31 Pages
Posted: 18 Sep 2013

Phillip C. Blackman
Independent

Kirk J. Stark
University of California, Los Angeles (UCLA) - School of Law

Date Written: September 17, 2013

Abstract
An IRS chief counsel memorandum published in 2010 found that a taxpayer was permitted to claim a charitable contribution deduction for the full amount of a gift, even thought a substantial portion of the gift was effectively refunded to the taxpayer through a charitable state tax credit. In this article, Blackman and Stark explain that the IRS memorandum permits states to adopt charitable tax credits that effectively enable taxpayers to convert state taxes to charitable gifts — a strategy that would be attractive to alternative minimum taxpayers. Those state charitable tax credits (some with extraordinarily high credit percentages) appear to be on the rise, perhaps in part because they effectively enable a transfer of revenue from the federal government to the states. The authors believe the memorandum should be repudiated (as a matter of appropriate federal tax policy), but if it is not, states should consider taking advantage of it. The article discusses how the strategy applies in the case of proposed California legislation that would permit a 60 percent tax credit for contributions to a state fund designed to increase financial support for low- and middle-income students to pursue secondary education.

Submitted by flu on December 24, 2017 - 10:23am.

There is already a 50% tax credit from Cal Grant.

http://www.treasurer.ca.gov/cefa/catc/in...

Mainly useful for people subject to heavy AMT.

The sweetener would be if there were donations that produced 80-95 cents on the dollar.tax credit.

Submitted by scaredyclassic on December 26, 2017 - 12:16am.

so how does that work?

i give $100 to cal grant.

i get a 50 state tax credit so im out of pocket 50.

then i get to deduct 100 on fed taxes?

say thats worth 35 to me. so for 100 i get 85 in tax breaks. im out 15$.

or i could kerp the 100 pay the full tax burden and keep about 55. im out 45?

is that it?

Submitted by ocrenter on December 26, 2017 - 7:09am.

scaredyclassic wrote:
so how does that work?

i give $100 to cal grant.

i get a 50 state tax credit so im out of pocket 50.

then i get to deduct 100 on fed taxes?

say thats worth 35 to me. so for 100 i get 85 in tax breaks. im out 15$.

or i could kerp the 100 pay the full tax burden and keep about 55. im out 45?

is that it?

Best scenario is state sets up a charity for you to donate in lieu of state income tax. And you simply get to write off 100% of that donation for the fed government.

Maybe state treasurer Chiang can set this up.

Submitted by gzz on December 27, 2017 - 2:31pm.

To answer the OP, I do have experience with ballot measure petition drives, I worked for a company that did them purely on the local level for three years in college.

At the low end, it will cost about $1.5 million to get something on the California state ballot unless you have a huge source of volunteer labor that is willing to be trained in proper signature gathering.

The first steps are to come up with language that the state Legislative Office will recommend, and then poll it to see if you can try to qualify it immediately versus waiting for an election that will have voters more favorable to you. Off year v presidential year, primary election v general.

Submitted by plm on December 28, 2017 - 9:15am.

https://www.cnbc.com/2017/12/28/this-one...

Cnbc had an article to get around the SALT double taxation by changing state taxes to be paid by employers instead and reducing employee pay to make the net the same.

Submitted by flu on January 4, 2018 - 11:50pm.

Boom!

http://www.chicagotribune.com/business/c...

California Senate leader on Thursday introduced legislation aimed at circumventing a central plank in the new Republican tax law, introducing a model that - if successful - could be replicated all over the country.

California Senate President Pro Tempore Kevin de León, D, introduced a bill that would allow taxpayers to make a charitable donation to the California Excellence Fund instead of paying certain state taxes. They could then deduct that contribution from their federal taxable income.

Submitted by scaredyclassic on January 5, 2018 - 12:52am.

flu wrote:
Boom!

http://www.chicagotribune.com/business/c...

California Senate leader on Thursday introduced legislation aimed at circumventing a central plank in the new Republican tax law, introducing a model that - if successful - could be replicated all over the country.

California Senate President Pro Tempore Kevin de León, D, introduced a bill that would allow taxpayers to make a charitable donation to the California Excellence Fund instead of paying certain state taxes. They could then deduct that contribution from their federal taxable income.

So cool

Submitted by flu on January 5, 2018 - 2:24pm.

NJ is now part of this fight too. Lol..

https://www.bloomberg.com/news/articles/...

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