SACRAMENTO – The California State Senate today, in a bipartisan vote, passed Senate Bill 227. Authored by Senate Leader Kevin de León (D-Los Angeles), SB 227 is one of two measures designed to protect California taxpayers from federal tax increases under the Republican tax overhaul Congress passed last year to benefit corporations and the wealthiest Americans..
“The new Republican tax law deliberately targets Americans in blue states that didn’t vote for Donald Trump, and it could cost Californians billions of dollars,” Senate leader Kevin de León said. “SB 227 gives Californians a measure of control over their tax dollars and helps fund vital public services like schools and parks.”
Last week, the Wall Street Journal reported that a U.S. Treasury Department official sent a warning to California and other states currently exploring workarounds to the Trump Administration’s tax policy. In response, Senator de León told the Journal, “It is my duty to do everything within my power to protect the taxpayers of California against a very capricious, mean-spirited tax policy that unfairly targets Californians.”
On December 20, 2017, President Trump signed into law a sweeping tax proposal that will add at least $1 trillion to the federal deficit. The new tax law gives the wealthiest Americans and corporations more than $1 trillion in tax breaks, while raising taxes on millions of households. Specifically, the new law caps the state and local tax deduction at $10,000, a move that will increase taxes nationally by $36 billion dollars in 2018 and $90 billion by the year 2024.
In California, it is estimated that roughly three million taxpayers will continue to itemize under the new federal law. The average California taxpayer claimed $18,438 in state and local tax deductions in 2015.
PROPOSAL – The Protect California Taxpayers Bill Package
SB 581 creates the California Excellence Fund, and allows donors to direct a charitable contribution to one of the following beneficiaries: University of California, K-12 public education, the California State University, Community Colleges, or State Parks.
SB 227 will allow California taxpayers to make charitable donations to the California Excellence Fund, and receive and receive an 85% tax credit for their contribution. The taxpayer will then be able to deduct the contribution from both state and federal taxes.
The proposal builds upon a California tax credit, as well as other credits in various states around the country. In 2014, the California Legislature passed SB 798 the College Access Tax Credit (de León). The College Access Tax Credit provides a tax credit for contributions made to the Cal Grant program.
Additionally, 17 states currently use this model to fund private education, including Alabama, Arizona, Florida, Georgia, Illinois, Indiana, Kansas, and Louisiana.