Blue-state Democratic attempts to circumvent the new tax law's limitations on state and local deductions are "dead on arrival," top Republican taxwriter Rep. Kevin Brady said Monday.
The Texas chairman of the House Ways and Means Committee suggested that the IRS would bat down the attempts by governors in states such as New York and California to work around the limit by setting up government-run charities or taxing payrolls rather than income.
"The message here is that these high-tax states need to stop looking for [ways] to create new tax loopholes and finding ways to evade taxes, and spend more time trying to lower their just brutal tax burdens on their workers and families," Brady told reporters at the Capitol.
"All these gimmicks are dead on arrival," Brady added. "They’re wasting their time."
Democrats in high-tax states are pushing legislation meant to allow their citizens to get around the new $10,000 limit on state and local tax deductions. In California, for instance, Democratic legislators are exploring the possibility of funding services through government-run charities, allowing taxpayers to use the federal charitable deduction rather than the SALT deduction. In New York, Gov. Andrew Cuomo has called for studying the possibility of transitioning to payroll taxes rather than state income taxes.
The Republican-led Congress has not moved to prevent such state workarounds, and Brady didn't indicate that such a legislative fix would be in the works. And, Brady's comments aside, the Trump administration has not officially stated any intentions for rules meant to stop states from maneuvering around the limit and thus cutting into government revenue. Treasury Secretary Steven Mnuchin did say earlier this month, though, that the idea of turning state and local taxes into charitable contributions was "ridiculous."