Salt deductions: Californians can get federal tax relief

California’s state budget is extremely dependent on the income tax of wealthy residents.

Governor Gavin Newsom’s Proposed budget 2025-26 It suggests that the state will receive $ 133.7 billion in income tax, more than 60% of the total revenue from the Fund. Almost half of this will be paid by 1% of the Californians sitting at the top of the taxable ladderS

The risk of reducing such dependence is that taxes on the rich tend to swing up and reduce more than taxes on ordinary wage workers, as investment profits are significant parts of the taxable income of wealthy people.

When the rich become richer, California sees multi-billionate revenue from revenue. But the decline in their investments often leads to a sharp decrease in tax revenue. In his budget, Newsom mentions “swinging revenue and uncertainty, which are a hallmark of the variable tax system in California.”

The new budget cites a recent revenue revenue that allowed the Newsom budget to expand some categories of expenses, such as A major increase in tax subsidies For the dressed movie and video industry in southern California, one of his pet programs.

The validity of the new budget revenue assumptions is in doubt due to fires that have affected Los Angeles County. But regardless of their impact, the state will continue to depend on the variable revenue from the wealthy ones, including those who have lost their homes in the Pacific Palisadi and Malibu.

By chance, just like the new budget and fires become prominent positions in the political program of Capitol, something else can happen in Washington that can affect the harvest of taxes on California taxes on the rich.

With Donald Trump, negotiations are being negotiated again in the White House or retention in 2017 in the federal tax law, which adversely affected countries such as California and New York, whose budgets depend on taxes on the income of the rich.

The change, part of a much more wearing tax policy repair, limited deductions for state and local taxes – salt in political folk language – with respect to the Federal Tax Declaration of up to $ 10,000.

The restriction has an indirect effect of increasing federal taxes on taxpayers who pay over $ 10,000 in salt every year. Other aspects of the 2017 tax bill signed by Trump took advantage of the rich, but even so, tax officials in California estimated that the net taxpayers in California would be $ 12 billion a year increase in their federal tax liabilities.

The legislators and governors of New York and California regarded it as a deliberate hit from Republicans, including Trump, of Blue State Finance, and tried, and excluded, to cancel it from then, to no avail. They worried aloud that the very reduced deduction of salt would encourage rich taxpayers to move to states with low or no taxes on income, such as Nevada, Texas and Florida.

The provision of salt and other parts of the 2017 legislation will automatically disappear at the end of this year, unless it is renewed by Trump and dominated by a Republican Congress. Most of its provisions are likely to be expanded, but the fate of salt is in the air.

Now Trump seems welcoming to let him die, but he may ask for discounts from some kind of blue countries. Meanwhile, Politico reports that a group of Republican members of the Congress, called The Freedom Caucus, proposes to cancel the restriction on salt if the blue countries agree to impose it on corporate income taxes to compensate for the expenses.

By raising corporate income taxes, however, such a transaction would harm relations between Blue State politicians like Newsom and their corporations, including his friends in Hollywood.

This will be another political hit of GOP – rubbing salt in their wounds as it was.