California Senate passes bill to work around tax overhaul

SACRAMENTO, Calif. (AP) — The California Senate approved legislation Tuesday that aims to protect wealthier taxpayers from facing higher federal tax bills under changes signed late last year by President Donald Trump.

Opening another front in their ongoing war with the Trump administration and Republican-led Congress, California Democrats are looking to insulate the higher-income taxpayers who provide a massive share of the state's revenue and ensure they don't leave for lower-tax states.

The new federal tax bill caps a deduction for state and local taxes at $10,000, which hits wealthier taxpayers in high-tax states like California the hardest.

The California bill would allow people to make a charitable contribution to the state in lieu of state income taxes, then reduce their state taxes by 85 percent of their contribution.

Senate President Pro Tem Kevin de Leon, the bill's author, hopes the bill would let people get around the federal changes by deducting their state taxes as a charitable contribution instead.

"This new law deliberately targets Americans in blue states...that didn't vote in large numbers for Donald Trump," said de Leon, a Los Angeles Democrat who has made legislative battles with Trump a central plank of his challenge to U.S. Sen. Dianne Feinstein, a fellow Democrat.

The legislation, which now goes to the Assembly, was backed by all Democrats and two Republicans in a 27-7 vote.

But several Republican critics said the bill may not be legal, potentially exposing taxpayers who take advantage to higher taxes and a fight with the IRS.

"This is a missile shooting at Washington, D.C., and it will not stand," said Sen. John Moorlach, a Republican from Costa Mesa in Orange County.

More than a third of California taxpayers used the state tax deduction in 2015, claiming an average of $18,438 — the third highest after New York and Connecticut, according to IRS data.

De Leon estimates that 3 million taxpayers would be eligible to benefit from the charitable contribution option.

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Photo: Getty Images

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