Democratic states' response to Trump's 'anti-weaponization' fund: Tax their payouts at 100% so there isn't a penny left

Democratic leaders from several states across the country have come up with an unusual strategy to stop the $1.8 billion compensation fund that President Donald Trump set up for people who allege they were unfairly investigated by the government: tax it 100%.

The governor of California, Gavin Newsom, was among the first to back the measure. "It's an action we look forward to taking," he said. Lawmakers in New York and Wisconsin are already working on bills, and Democratic candidates in blue-majority states are joining the gambit.

"The slush fund is a blatantly corrupt theft of taxpayer dollars, and we need to do everything we can to stop it," Sen. Michael Bennet, the leading Democratic candidate for governor of Colorado, declared. "I actually think this won't wear well with Republicans or Democrats in America."

The fund, announced earlier this month, was born out of a deal in which Trump dropped a $10 billion lawsuit against the IRS over the leak of his tax returns.  In exchange for creating a $1.776 million fund intended to compensate those who allege they were wrongfully prosecuted, which is in line with his narrative of a justice system "instrumentalized" against him and his allies.

The initiative generated backlash from both Democrats and some Republicans. A federal judge temporarily blocked it on Friday, while critics question how the money will be distributed and fear it will go mainly to President Trump's allies.

In California, Assembly Budget Committee Chairman Jesse Gabriel announced that Democrats plan to include the tax in the state budget. "That money belongs to taxpayers, and we're going to make sure it stays with taxpayers," he maintained. In New York, Gov. Kathy Hochul favored the idea after lawmakers in her state began pushing for the 100 percent tax. "I have no problem with there being consequences for people who accept that money," she told reporters, calling it "obscene" to reward "people who have committed crimes or injustices."

Leading the push in New York is Alex Bores, an Assembly member running for Congress. "It's simple: If you're a New Yorker and you take from this illegal slush fund, New York state will tax 100 percent of it. If you storm the Capitol and you take from this slush fund, too bad, we're taking it," he said in a video posted on X. "If you stormed the Capitol and you take from this fund, tough luck, we're going to take it away from you."

The idea is also gaining traction outside Democratic strongholds. In Wisconsin, an election battleground state, Democrats introduced the No Taxpayer Money for Insurrectionists Act, citing concerns that the payments would benefit people prosecuted for the Jan. 6, 2021, Capitol storming or for trying to overturn the 2020 election results.

Department of Justice spokeswoman Natalie Baldassarre came out swinging and criticized Democratic governors: "Instead of flaunting their love of lawfare and taxing constituents into oblivion, blue-state governors should focus on preventing more of their residents from fleeing in droves to free states with lower taxes, less crime, and governments that actually serve the people they represent."

The state strategy could face legal hurdles. Lawrence Zelenak, a professor at Duke Law School, recalled that the late Supreme Court Justice Oliver Wendell Holmes Jr. once warned that "the power to tax is not the power to destroy while this Court sits," alluding to the constitutional limits of that tool.

The fund itself also has its days numbered in court, at least for now. Federal Judge Leonie M. Brinkema, of the District of Virginia, has scheduled a hearing for June 12.