Tags: treasury sec. steve mnuchin | tax reform law | salt | donor option

Randy Levine: Mnuchin Wrong — Donor Option Legal and Fair

Image: Randy Levine: Mnuchin Wrong — Donor Option Legal and Fair
Treasury Secretary Steve Mnuchin (Reuters)

By    |   Sunday, 10 June 2018 10:12 PM

In the past few months, I have written several pieces taking issue with the recent tax law's treatment of the limitations on state and local deductions (SALT). 

I urged Gov. Cuomo to establish a mechanism for New York state, which would allow taxpayers to set forth a portion of their state and local taxes to be contributed to valid state and local charitable entities such as schools, health organizations and other valid programs, which would allow taxpayers to receive a charitable deduction for those payments. 

This mechanism has been in place and operating with no IRS objection for years in states such as Missouri and Arizona. 

Showing great leadership, the governor and state legislature approved a program similar to those that have been operating unchallenged by the IRS in those states. 

Now, [Treasury] Secretary [Steve] Mnuchin is warning that the IRS will not permit this mechanism to be put into effect in New York, California, New Jersey and elsewhere.

When President Trump campaigned, he spoke repeatedly about tax reform. He spoke of lowering rates and eliminating the carried interest rule, but he never said he would put caps on SALT. 

I am told the president had no issue protecting SALT, but let go the question of limiting these deductions in order to get the legislation passed. It was Congressional Republicans from states who would benefit from the SALT limitation that pushed for the caps.

The new tax law added billions of dollars to an already exploding federal deficit. It now seems obvious that the preconceived plan of some was to arbitrarily change precedent in order to fund that deficit from taxpayers, but only from certain states. That does not work. 

Citizens in all states need to be treated equally. Similarly, these SALT caps create an even larger redistribution of tax revenues from states such as New York, California, New Jersey and Maryland that provides billions of dollars more in revenue to Washington than they receive back, to states that do not contribute as much to Washington as they receive back. 

This redistribution effectively allows those states which contribute less to receive an even larger disproportionate share of federal proceeds and allows them at the expense of contributing states to keep their local taxes low. 

If the IRS tries to overrule years of precedent and impose a new arbitrary and capricious rule, Gov. Cuomo and other governors should take it to court. It is a winner. 

You cannot have a system where the same practice is fine in some states, but not others. If it works in Arizona and Missouri, it works elsewhere.

The new tax law has some real positives and states such as New York are overtaxed. For example, in New York, although individuals and companies are fleeing the state, some are calling for even higher taxes. 

But that is no reason for the IRS or, for that matter, certain pundits and editorial boards to urge the sweeping aside of precedent and label long-existing practices a gimmick. 

Lowering state taxes and being fair to taxpayers in all states is not inconsistent. Everyone should support that. 

Corporations, Wall Street investors, taxpayers in states that receive a disproportionate amount of tax dollars and many others have done well in this tax law. Now it is a time for fairness, the hardworking taxpayers in donor states need a level playing field.

Moreover, if this discrimination is allowed to occur, voters in these donor states, especially in districts presently held by Republicans, might very well switch, which could flip the House Democratic and undo all the positive benefits of the tax law. 

Donor states may not have the lobbyist or swamp on their side, but they do have the Constitution, the law and the moral high ground.   

Randy Levine is president of the New York Yankees. These opinions are his own, not the Yankees.

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In the past few months, I have written several pieces taking issue with the recent tax law's treatment of the limitations on state and local deductions (SALT). I urged Gov. Cuomo to establish a mechanism for New York state, which would allow taxpayers to set forth a portion...
treasury sec. steve mnuchin, tax reform law, salt, donor option
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2018-12-10
Sunday, 10 June 2018 10:12 PM
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