Do you guys remember when I told you that some Blue States were going to create their own version of tax chicanery to deal with the GOP onslaught on their finances?   (We are talking about that $10,000 maximum SALT – state and local taxes- deduction limit.)

Well, we’ll consider what two states have already done.  (Don’t you like that “well, we’ll”?)

While it’s not clear how many employers are enthused with the New York state response, I’m betting they’ll be on board in droves.  Because they will save money, too.  (There will need to be some adjustment to union contracts- and determining what happens when folks live in different states than where they are employed.)  The deadline for them to sign on is 1 December for CY 2019.

Without this adjustment, a bit more than 8% of the folks who live in New York will get zapped by an average of $3340 (due to the SALT limitations).  So, New York invented a new state payroll tax.  Should the employer join the deal, the amounts deducted will count towards the employee’s state income tax.  And, employers get to deduct these amounts against their federal income taxes.  (Businesses have no limitation on SALT payments.)

Oh, yeah.  Employers will be lowering folks’ pay checks, but their net pay [take-home] will still be the same.  (In other words, less pre-tax income, but with the lower federal tax bite, there will be the same or more after-tax income.)

Basically, the system in New York works as follows. For those folks whose wages exceed $ 40,000, there is a new (optional) payroll tax of 1.5% (which will rise to 5% by 2021; the phase-in period is to allow folks to have a chance to adjust to the change in net and gross payroll).  Once the 5% max is operational, someone whose wages were $ 100,000 would have the ability to save $ 700 by this scheme, even though his new payroll would be $ 97,000.

The problem for multi-state corporations is explaining why someone who is working in Florida will have a payroll level of $ 100K, while this NY employee earns $ 3K less. Also, pre-tax wages set up Social Security benefits (trust me, a $ 3K drop in payroll at $ 100K won’t affect one’s monthly checks on retirement by much), but it does affect 401(k) matching contributions and limitations.  Plus, the employee’s self-regard with that lower salary.

And, then, there’s the New Jersey response.  Their concept is to let taxpayers proffer charitable donations to cities, counties, local government entities, and school boards in lieu of paying taxes.  Since there is no limit on charitable donations (ok, there is, but none of these folks will be shelling out 50% of their income to pay these “charitable deductions”), the SALT payment limitations won’t be a problem.

As opposed to the New York solution, the Jersey concept has a problem- at least to me.  After all, when we donate $100 to NPR and they provide us with an ugly coffee cup that they claim is worth $ 10, we only get to deduct $90 as charitable contributions.  Isn’t donating $2K  to the school board and getting a $ 2K benefit ensuring that we have no valid charitable deduction?

Now, Drs. Joseph Bankman and Jacob Goldin (both from Stanford), David Gamage (Indian University), Daniel Jacob Hemel (U Chicago), Darien Shanske and Dennis J. Ventry (UC Davis), Kirk J. Stark (UCLA), and Manoj Viswanathan (UC Hastings) feel this approach is valid, and have developed a 44 page monograph explaining their thinking.  (Just so you know, this isn’t really about New Jersey, but covers the 113 such programs that already exist in 32 states and DC where this practice has already been condoned.  After all, if Alabamians and West Virginians can donate to scholarship funds and don’t have to reduced the value of their donations by the value received, so can Jerseyites.)

We already heard the sanctimonious proclamations by the Texas Congressman (Kevin Brady, Chair Ways & Means Committee) who claims it’s the Blue States that are hurting the economy- neglecting to mention that it’s the Red States who take more money from the Feds (to balance their budgets) than they put in- as opposed to the Blue States who fund the Red State’s vampire actions.  And, of course, the IRS takes issue with this. (Yes, even though- at least in New Jersey’s case- the solution chosen is one the IRS has allowed for years.)

Oooh!  I see a bunch of fun in the courts!  You, too?Today is the 74th anniversary of D-Day.  A coordinated attack on the main shores of Europe to remove the threat of Hitler and fascism.  When America knew the world required concerted action to make all of our lives better.  We’ve forgotten that.

And, today is also the 50th anniverary of the day when Bobby Kennedy was declared dead- having been (fatally) shot in the head very late on the 5th of June. It was a day of agony for me- not only because Bobby was dead, but to discern if I would actually set foot in a church (considered an improper act by religious Jews) on the 8th of June.  I’m glad I did- and still tear up when I recall Teddy’s eulogy for his brother…

“My brother need not be idealized, or enlarged in death beyond what he was in life; to be remembered simply as a good and decent man, who saw wrong and tried to right it, saw suffering and tried to heal it, saw war and tried to stop it.”

Whether you call it ‘Tikun Olam’ or use Bobby’s words, “To Seek A Newer World”- that should be our mission statement.  Today.  Tomorrow.  Every single day.