Democratic leaders in blue states are coordinating to impose a 100% tax [3] on payouts from the Justice Department’s “anti-weaponization” fund.
The move represents a direct confrontation between state governments and federal initiatives tied to former President Donald Trump. By taxing the payouts at the maximum rate, Democratic officials aim to neutralize the financial impact of the settlement fund on residents of their states.
Governor Gavin Newsom (D-CA) and Democratic lawmakers in New York are leading the effort to recoup money from the fund, which is intended for victims of alleged political wrongdoing. The total size of the settlement fund is reported as $1.8 billion [1], though other reports place the figure at $1.776 billion [2].
"Too bad, we're taking it," Newsom said [4].
The strategy faces significant legislative and legal obstacles. Critics argue that such a tax may violate federal law or exceed state authority, creating a potential constitutional clash over the distribution of federal settlement money.
Treasury Secretary Scott Bessent responded to the proposal. "No cure for STUPID!" Bessent said [5].
Despite the rhetoric, the states are racing to finalize the legal framework necessary to capture the payouts. The coordination between California and New York suggests a broader strategy among Democratic-led states to counteract federal policies they deem politically motivated.
“"Too bad, we're taking it"”
This conflict underscores the growing trend of 'state-level resistance,' where blue states use tax codes and administrative law to nullify federal policies. If successful, the 100% tax would effectively convert a federal settlement into state revenue, further deepening the legal and fiscal divide between state capitals and the U.S. Treasury.
