The Assembly Revenue Taxation Committee held an “Educational Briefing on Federal Tax Reform” on March 6.
Assembly Member Autumn Burke, who chairs the committee, was joined at times by committee members Rob Bonta and Kansen Chu. The chair introduced the hearing’s three featured speakers, led by Justin Garosi from the Legislative Analyst’s Office, who provided a brief overview of some of the major federal tax changes from 2017.
Garosi discussed how federal tax reform will benefit many individuals. He discussed the impact the reform will have on a family of four with two children under the age of 18 and an income of $75,000. In his example, which also was included in his distributed materials, he explained how the federal tax changes would result in a $2,224 savings for the family.
The next two speakers, professors Daniel Hemel from the University of Chicago School of Law and Darien Shanske from the UC Davis School of Law, testified on new limits to the federal personal income tax deduction for state and local income taxes.
Hemel started by stating the problems he sees in the recent tax reforms. He voiced agreement with the LAO’s presentation that most California taxpayers will see their tax burden eased by the new reforms, but said this is a problem because the loss in revenue will result either in higher taxes in the future (to recoup lost revenue) or a reduction in federal spending on state and local programs.
Bonta asked the guest speakers if local governments can play a role in providing relief from the limit on the SALT deduction. Hemel proposed a plan, which he said could be used at the state or local level, in which a taxpayer would purchase a “Golden State Coin” from a local entity such as a school district as part of an elaborate scheme to buy and pay taxes with virtual currency to avoid the federal SALT deduction limit. Hemel acknowledged that there could be legal issues, such as the constitutional prohibition on states producing currency.
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