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The Internal Revenue Service has blessed similar arrangements that California has used to raise money for college scholarships, and that several states use to preserve land from development or generate money for private school vouchers. But it’s one thing to offer a tax break to try to support a public project or service; it’s another to do it solely to cut Californians’ federal tax bills. Passing the De León bill would be the state’s version of setting up a shell company in the Cayman Islands in order to shelter Californians’ income.
Problem is, the "average" American isn't mathematically literate enough to realize that there are different aberages, such as a median, mode, geometric mean, arithmetic mean, harmonic mean, etc.
California is not the one who decides whether a state tax is deductible or not. It is the feds and the IRS.Watch some bloody court battles here.
If California calls it a charity contribution and the IRS disagrees, who wins?
"But there’s nothing “charitable†about it. The so-called Excellence Fund is nothing more than a holding company inside the state treasury specifically designed to create a tax dodge. Even the LA Times editorial board looked at this scheme and advised against such a corrupt practice."Prediction:If California tries this, the IRS may take them to court (I would hope that they do so).It will end up before the U.S. Supreme Court, which will disallow the deduction.After which... there's going to be A LOT of unhappy California taxpayers...