Blue States May Fight Tax Reform by Becoming Non-Profits

Wile E. Coyote had a better plan for catching the Road Runner than the Democrats have for battling tax reform. As the high cost of the blue state model risks kicking in with tax reform, they're working harder than Al Capone's accountants to soften the blow.

Kirk Stark, a law professor at the University of California, Los Angeles, has suggested that states encourage residents to donate money to their state governments, then let the governments credit those donations against their state income taxes. Such donations would qualify as charitable donations, which are still fully deductible on federal taxes.

Mr. Stark noted that such programs already existed, albeit in a much more limited form. Several states let residents count donations to private schools as state tax payments under certain circumstances, an initiative that conservatives have promoted as a step toward school vouchers.

Sure. Why not turn the blue states into charities. They increasingly operate as social welfare organizations with a sizable part of their voting base as clients while actual working people pay the bills.

Another idea would be for states to partly or completely replace their income taxes with payroll taxes paid by employers, similar to existing taxes for Social Security and unemployment insurance.

In theory, such a move wouldn’t change after-tax income for either companies or individuals. It would just change where the tax checks were coming from. Companies would reduce workers’ pay by the amount of the payroll tax, and would be able to deduct the payments on their federal taxes. Because they would never receive the money, workers wouldn’t be taxed on it.

“In effect, it preserves the state income tax deduction,” said Dean Baker, a liberal economist who has been pushing for the plan.

So yes, if you thought that blue states would actually reform, the Brooklyn Bridge is going on sale at midnight. Instead, like Al Capone's accountants, the gimmicks will flow. 

But here's a thought. What about bringing in Hillary Clinton? Who has more experience running a slush fund? Who can do a better job of running a fake charity than Hillary Clinton, except Rep. Corrine Brown? 

Hillary Clinton has been playing the anti-president. Now she can put her skills to use for her base of blue states to help them set up their own Clinton Foundation.