California Governor Gavin Newsom announced on May 28, 2026, that the state will impose a 100 percent tax on any payments received by California residents from a new federal fund created by the Trump administration.
The fund, valued at $1.8 billion, is designed to compensate individuals who say they were wrongfully prosecuted by the federal government. Newsom’s office described the fund as a “Jan. 6th slush fund.”
California Announces Tax Measure
Newsom said the state would move to tax the full amount of any distributions from the fund.
“One thing that I think we’re going to try to do … is tax 100 percent. Anyone from California that receives any of those funds, we want to tax 100 percent of those proceeds. And that’s an action the state of California can take,” Newsom said.
The fund stems from a settlement between the Justice Department and the IRS under President Trump.
New York Introduces Similar Bill
A similar proposal is advancing in New York. State Assembly member Alex Bores, a Democrat running for Congress, introduced the Anti-Insurrectionist Act.
The bill would place a 100 percent tax on New York residents who receive money from the same federal fund.
“It’s simple: If you’re a New Yorker who takes from Trump’s illegal January 6th slush fund, NY will tax 100% of it,” Bores said in a post on X.
The fund has drawn criticism from both political parties since the Justice Department announced it last week. Some Republican senators opposed the plan, which contributed to delays on an immigration enforcement bill, according to Sen. Ted Cruz of Texas.
Federal Response
The Justice Department pushed back against the state actions. Spokesperson Natalie Baldassarre said in an email to The Hill that state leaders should address residents leaving for other states instead of blocking the fund.
Also Read: Trump Embarrasses California Gov Gavin Newsom in Front of Reporters
“Instead of flaunting their love of lawfare and taxing constituents into oblivion, Governors Hochul and Newsom 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,” Baldassarre said.
Why This Matters
This dispute shows the continuing conflict between the federal government and Democratic-led states over how to address claims of selective prosecution. The Trump administration created the fund to provide payments to people who believe prior cases against them were politically motivated.
California and New York are using their tax powers to limit the effect of that policy within their borders.
The conflict comes as California continues to lose population to states with lower taxes. Residents and businesses have moved to Texas, Florida, and other locations. The new tax plan could speed up that trend if implemented.
