New Jersey and other high-tax states have been struggling to find ways to let residents exceed the new federal cap on deducting state and local taxes. Like New York, the Garden State passed a law supposedly letting people make donations local governments in the amount they owe in taxes in return for a property tax credit.
The federal Internal Revenue Service previously signaled that such bogus charity deduction schemes wouldn’t be allowed.
Late last month it issued rules making that clear. No surprise there — taxpayers have never been able to count their payments for goods or services as a charitable donation, so getting a tax credit in the same amount wasn’t going to fly.
But what hasn’t been as clear is why high-taxing states have fought so hard against this part of last year’s federal tax cut. New Jersey and three others have sued the federal government over it in a quixotic and money-wasting effort.
Read the full editorial here.