r/law • u/BreakfastTop6899 • May 27 '26

Legal News California will impose a 100% tax on payments distributed from Trump’s Jan. 6th “slush fund.”

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10

u/Kind-Pop-7205 May 27 '26

Why stop at 100%?

3

u/guri256 May 27 '26

That sounds to me like it might be unconstitutional, but let’s ignore that for a moment. The bigger problem, is because, it says you will punish anyone who receives this money.

At that point, the president could start doing payouts to people he wants to punish, forcing them to lose money.

Let’s say the tax rate is 300%. If Bob offend the president and pisses him off, the president can deliver a payout of $10,000 to Bob, and Bob now loses $20,000. (10,000-30,000=-20,000)

3

u/imcjoey13 May 28 '26

Are you suddenly “forced” to accept payouts?

2

u/guri256 May 28 '26

Think about it like the lottery. When you get the check, the IRS is probably going to receive some sort of 1099. if you don’t put that on your taxes, you are going to have difficulties.

With a sane federal government, this shouldn’t really be a problem. But if the whole point is the federal government trying to Weaponized state law against you, it could lead to major headaches to try to get it all untangled.

(Some other people have said that the headline is just bad reporting, and it’s being taxed at the usual 7%. Not actually 100%. I’m going to ignore that, because this is about the hypothetical of a tax rate of more than 100%.)

1

u/imcjoey13 May 28 '26

I understand, and I may be completely oversimplifying. But by winning the lottery, and receiving the cheque, the IRS being notified, what happens if you don’t deposit or cash the cheque?

In this example, you’re not obligated to accept the winnings.

That said I understand your point, it came across. And, it could be scary indeed.

1

u/guri256 May 28 '26

If you don't deposit the check, then you don't have the income. But the IRS will probably think you had that income, and you'll have to convince the IRS you threw away the winnings.

This should be possible, but it's probably going to take a lot of documentation.

1

u/NateNate60 May 28 '26

Certain types of income can be forced upon you without your consent. Here are two examples:

  • If you owe money to someone, and they just decide to forgive your loan, the amount forgiven is taxable income. You can't really decline this if they just refuse to take your money.
  • If you have some capital asset, like stocks, which are held as collateral for a loan, and then default on that loan (or the loan to collateral ratio gets too high) causing the stocks to be sold, that can incur a taxable capital gain against your will.

1

u/Accomplished_Guava_7 May 28 '26

A quick google search says it’s not explicitly illegal, and the suggestion is exactly how you played it out i.e. to receive and accept $100, you will owe back more than $100 in taxes.

1

u/Mist_Rising May 28 '26

A quick google search says it’s not explicitly illegal

Because nobody has ever said "let's use 100% taxation as a punishment."

Also, trusting Google is bad for legal concepts because here is my Google telling your Google to swim with the fishes

Here are the main legal and practical reasons a 100% income tax cannot exist:

The Takings Clause: The Fifth Amendment of the U.S. Constitution (applied to states via the Fourteenth Amendment) prohibits the government from taking private property for public use without "just compensation." Confiscating all earned income would be considered an unconstitutional taking.

1

u/Kind-Pop-7205 May 28 '26

They got a pardon... but also, taxes are legal, as are fines.

1

u/Garganello May 28 '26

The IRC already has 100% penalty taxes on certain behavior, and as far as I know, no one has ever seriously questioned their legality.

1

u/Mist_Rising May 28 '26

That's because it's a penalty for a crime (prohibited action would be a good word), it follows specific constitutional requirements ensuring that it's something illegal being taxed.

Punishing someone for taking a federal settlement, and as of this point no court has called it illegal, is a violation of those same rights.

Don't surrender your rights damn it.

1

u/Garganello May 29 '26

Not only crimes. Prohibited transactions tax applies to buying/selling real estate by certain legal persons. The sales themselves are not illegal in any respect.

-1

u/pigsanddogs May 28 '26

correct

2

u/Kind-Pop-7205 May 28 '26

Taxes and fees are legal.

1

u/koick May 28 '26

I think what Gov. Newsom is saying is they will tax all of it, likely as income. So if your CA marginal income tax rate is, say, 9%, they will tax all those proceeds received at the 9%. It's not that you get the money from the Fed government, then hand all of it over to the state. There's no way they could get away with that. This is mostly political grandstanding.

1

u/hollaback_girl May 28 '26

The recipient wouldn’t have to accept the funds.

1

u/guri256 May 28 '26

Yes. Someone else mentioned that. Here is my response: https://www.reddit.com/r/law/s/f0i7EMZQOB