Geeze,
That just sounds replete with problems. Essentially, they are trying to turn $6,000 of non-deductible income tax to a tax levied on the employer. So who gets the $6,000? The SUTA folks? A newly created taxing authority? It gets even less likely to be effective if there is some 'agreement' of a salary reduction.
A whole new set of laws would need to be written (and/or changed), both at the Federal level and the State level.
Of course, that's not our job to guess how it would turn out in the tax court, but I think setting their salary at $100,000 and then setting up a fixed 'before tax' deduction of $6,000, or an equivalent percentage, would fail the SALT tax rules. Seems like the salary in Box 1 of the W-2 would need to be $94,000 because it is box 1 that goes at the top of the Form 1040. If you put $100,000 in box 1, which section of the Internal Revenue Code could be used in order to take a $6,000 pre-tax deduction? Section 61 of the Code says everything is income unless some other section says it is not.
I love the idea though. It's always intriguing to me to see how organizations try to subvert the spirit (if not the letter) of the law.
Kind of like Texas, other states could convert some of the income tax to a property tax because you can still deduct up to 10K of property tax.
That doesn't work well for me because I live in an 1,810 square foot house in Dallas on a 50 by 138 ft. lot and my property tax is already just over $10,000 per year. Hey, but we don't have a state income tax! LOL
I tell people I don't own my house; I just rent it from the school district and a plethora of other taxing authorities. My oh my.
Kind regards,
Leslie
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