Blue States Target Trump Fund With 100% Tax

Democratic leaders in California, New York, and Wisconsin are advancing proposals to impose a 100% tax on payouts from President Donald Trump’s "anti-weaponization fund," aiming to ensure recipients receive no financial benefit [1][2]. The fund, established as part of a settlement involving a lawsuit against the IRS, has sparked bipartisan criticism over its potential to reward political allies or individuals involved in the January 6, 2021, Capitol attack [1].

Key takeaways

• California, New York, and Wisconsin lawmakers have proposed 100% state taxes on the fund's distributions [1][2].
• The $1.8 billion fund was created to settle a $10 billion lawsuit Trump brought against the IRS over leaked tax records [1][2].
• Senate Democrats introduced a federal bill to tax the payments at 100% and add penalties for evasion [1].
• Critics, including some Republicans, question the fund's legality and fear it could become a "slush fund" [1][2].

State Legislatures Move to Block Payouts

California Governor Gavin Newsom announced that his state would attempt to tax 100% of funds received by residents from the Department of Justice pool [1]. Similarly, New York Assemblymember Alex Bores introduced the "Anti-Insurrectionist Act," which would impose a 100% state income tax to prevent residents from benefiting from what he termed a "slush fund" [1]. In Wisconsin, Senate Minority Leader Dianne Hesselbein proposed the "No Taxpayer Dollars for Insurrectionists Act," arguing state funds should not support individuals involved in the 2020 election overturn efforts while residents struggle with rising costs [2].

Origins of the Settlement and Federal Pushback

The fund was established after Trump dropped a $10 billion lawsuit against the IRS regarding leaked tax returns, creating a $1.7 billion to $1.8 billion settlement pool [1][2]. Acting Attorney General Todd Blanche stated the fund provides a lawful process for "victims of lawfare" and is not limited to specific groups or events [1]. However, controversy intensified after a radio host shared screenshots suggesting retired judge and Trump attorney Jim Troupis, who faces felony charges for a false elector scheme, requested $3.2 million [2]. In response, Senate Finance Committee Ranking Member Ron Wyden and Majority Leader Chuck Schumer introduced federal legislation to impose a 100% excise tax on these payments, arguing taxpayers should not finance "allies, cronies, and insurrectionists" [1].

Why it matters

The conflicting proposals raise significant legal questions about the authority of states and the federal government to tax specific settlement payments