Blue states move to tax payouts as judge freezes $1.8B Trump fund
Democratic leaders in several blue states are pushing plans to tax payments from President Donald Trump’s “anti-weaponization fund,” effectively allowing states to claim the entire award through taxation.
The proposals come as the fund faces growing legal challenges. On Thursday, a federal judge in Virginia temporarily blocked the Trump administration from moving forward with the nearly $1.8 billion program while litigation continues.
The fund was created as part of Trump’s agreement to drop his $10 billion lawsuit against the IRS over the leak of his family’s tax records.
Critics have described the program as a potential benefit for Trump allies, including some Jan. 6 defendants who have since been pardoned by the president.
Blue states move quickly
Even with the program temporarily frozen, Democratic lawmakers in several states are continuing efforts to ensure any future payouts would be taxed away.
California Gov. Gavin Newsom has endorsed taxing any payments received by Californians.
“Anyone from California, who receives any of those funds, we want to tax 100% of those proceeds,” his press office posted on X . “And that’s an action the state of California can take and that’s an action we look forward to taking.”
New York Gov. Kathy Hochul also signaled support for the idea, telling reporters she has “no problem with there being consequences for people who accept that money.”
Lawmakers in Illinois, New Jersey and Wisconsin are pursuing similar proposals.
Legal questions remain
The biggest unanswered question is whether a 100% tax would survive a court challenge.
Joseph Bishop-Henchman of the National Taxpayers Union Foundation told Politico such a tax would be highly unusual and could face legal scrutiny.
In New York, Democratic Assemblyman Alex Bores is pushing legislation known as the Anti-Insurrectionist Act and hopes lawmakers can vote on it before the legislature adjourns for the summer.
“We can’t stop Trump from breaking the law in Washington… but we can decide that in New York, money you got for attacking American democracy is fully taxable,” Bores told NBC News.
California and Illinois lawmakers are exploring whether similar language can be added to state budget bills before legislative deadlines expire.
In Wisconsin, Senate Minority Leader Dianne Hesselbein has introduced a bill called the “No Taxpayer Dollars for Insurrectionists Act” that would tax payments from the fund at 100%.
She told Wisconsin Public Radio that Wisconsinites are suffering from higher prices on gas and groceries and “that’s the thing that we need to be thinking about, not what happened in 2021.”
Questions remain over payouts
The immediate question may be whether any payments are ever distributed.
The Trump administration continues to defend the fund, and Treasury Secretary Scott Bessent dismissed Newsom’s proposal Thursday, saying, “There’s no cure for stupid.”
Even if the fund survives its court challenges, states could face another practical obstacle: identifying who receives payments.
The agreement establishing the program does not require recipients to be publicly disclosed. Some policy experts argue that if those records remain private, states could have difficulty determining who received money and how much they received.
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Ella Rae Greene, Editor In Chief
