Blue States Plot 100% Tax to Seize Trump’s $1.8 Billion IRS Settlement

This whole legal fight kicked off when a bipartisan group of judges in Florida filed a lawsuit. They aren't convinced the $1.8 billion settlement is legit, calling it 'collusion and fraud on the courtLoaded Language' rather than a real resolution. It’s the latest chapter in Trump’s $10 billion battle with the IRS. That suit started after a contractor was sentenced in 2024 for leaking tax returns that showed Trump paid just $750 in federal income tax back in 2016 and 2017. The administration says the fund is about fairness. But there’s zero oversight on who gets the money, and that’s creating a massive constitutional fight over who actually controls federal spending.

The 'Anti-Weaponization Fund' is basically a $1.8 billion pot of taxpayer cash the administration can spend at its own discretion. It wasn't approved by Congress. Instead, the money was diverted from IRS legal budgets through an out-of-court deal. Here’s the kicker: internal IRS memos show the agency’s own lawyers thought the case was only worth $45 million. That means the final $1.8 billion payout is a 3,900% premium over what the experts expected. It's a massive gap that the court is now forced to look at.

Most of the reporting so far has focused on the 'law and disorder' of it all, but the real story is the fiscal war. Blue state governors are moving past talk and into action. California, New York, and Maine have already introduced 'Restitution Recapture' bills. These laws would label any payout from the fund as high-bracket income and tax it at 100%. If a Trump ally in Los Angeles gets a $1 million check, California’s law would let the state grab the whole thing. It’s a move designed to turn a federal payout into a state-level win.

“Internal IRS memos valued the litigation risk at $45 million: the $1.8 billion settlement represents a 3,900% premium over the agency's own estimates.”

Section 7431 of the Internal Revenue Code is the specific law that let Trump sue in the first place. It allows for damages if tax info is leaked. But legal experts point out that awards under this section almost never go above six figures per person. This $1.8 billion figure is a total outlier. According to Syracuse University’s TRAC data, there’s no precedent for an IRS settlement this big. Not even close. It's a legal anomaly that has many questioning the true motive behind the deal.

Who’s actually on the list to get paid? The administration claims the money is for 'victims of the deep state,' but there’s no public application process. That suggests the money is headed to a pre-vetted list of political friends. We don’t know the names yet because the settlement allows for 'confidential disbursements' to protect privacy. However, the judge in Florida might force the Department of Justice to hand over that list under subpoena.

This freeze isn’t the only setback for the administration’s image. On June 1, 2026, a different judge ordered the president’s name to be scrubbed from the Kennedy Center, stopping a two-year closure for rebranding. It looks like the judiciary is finally starting to push back against the use of federal assets for political gain. For regular people, the Florida case is about more than just one fund. It’s about whether the White House can bypass Congress to spend money however it wants. Like this case, the Kennedy Center ruling signals a shift in how the courts are handling executive power.

Watch the votes on 'Restitution Recapture' in state capitals this week. If the 100% tax rate sticks, the fund could become a liability instead of a windfall for recipients. We’re watching something we’ve never seen in modern history: states using their own tax codes as a direct weapon against federal executive spending. It’s a high-stakes game that's just getting started.