Multistate coalition to sue feds over new tax law

See you in court: The President Trump-approved Tax Cuts and Jobs Act of 2017 will be the target of a new lawsuit brought by at least three states, including New York.
By GREGORY ZELLER //

Responding to “an economic missile (fired) at the fiscal health of our state,” Gov. Andrew Cuomo and friends are taking the federal government to court.

Joined by freshy minted New Jersey Gov. Phil Murphy and Connecticut Gov. Dannel Malloy – all Democrats – Cuomo announced Friday that the three states have formed a coalition that will challenge the controversial Tax Cut and Jobs Act of 2017 in court.

Governor Cuomo: Defending against an “economic missile.”

The lawsuit specifically will target the elimination of state and local tax deductibility from federal tax returns – a provision that “unfairly targets” the three states and “effectively preempts the states’ ability to govern by reducing the ability to provide for their own citizens,” according to a statement from Cuomo’s office.

And it does so “in violation of the Constitution,” the statement adds, prompting Cuomo to initiate a “three-pronged effort to fight the federal tax assault.”

The coalition and lawsuit comprise step one, with Cuomo already knee-deep in preparations for a tax law “repeal-and-replace” strategy and potentially major shifts in the structure of state tax policies, designed to ease burdens caused by the new federal law.

The governor first announced these strategies earlier this month in his blistering 2018 State of the State address, in which he tore apart President Donald Trump and the commander-in-chief’s positions on taxes, immigration and other key issues.

Litigators will zero in on the elimination of full SALT deductibility – a “blatantly partisan and unlawful attack on New York that uses our hardworking families and tax dollars as a piggy bank to pay for tax cuts for corporations and other states,” according to Cuomo.

“New Yorkers will not stand idly by,” the governor said Friday. “This coalition will take the federal government to court to protect our residents from this assault.”

Governor Malloy: Middle class stuck with Trump’s bill.

Those sentiments, naturally, were shared by the other governors in the coalition, who agreed the new law – championed by Trump and squeaked through the GOP-led Congress – will unfairly cost their states billions of dollars.

Capping the SALT deduction “had nothing to do with sound policy,” noted Murphy, a Harvard-educated financier and former U.S. ambassador to Germany who spent decades in high executive positions at multinational finance company Goldman Sachs.

“It is a clear and politically motivated punishment of blue states like New Jersey and our neighbors, who already pay far more to the federal government than we receive,” Murphy said in a statement. “I pledged that my administration would explore every legal mechanism to fight for New Jersey taxpayers, and that is exactly what we are doing today.”

According to Cuomo’s office, New York already sends $48 billion more to Washington each year than it receives in federal support, a “more extreme” disparity “than any other state.” A recent report by the NYS Department of Taxation and Finance projects that the elimination of full SALT deductibility will cost New York taxpayers an additional $14.3 billion.

Connecticut taxpayers stand to lose more than $10 billion in state and local deductions, according to Malloy, who agrees with the other coalition governors that the elimination of full SALT deductibility also rolls back a basic foundation of federal tax law that has always allowed states to raise revenues that are not double taxed.

“The GOP tax legislation gave massive handouts to the wealthiest 1 percent and stuck middle-class taxpayers with the bill,” Malloy said Friday. “The coalition we launch today will fight against the discriminatory impacts of this shortsighted and damaging Republican law.”

This is not the first time Cuomo has led a coalition of states in rising up against policies championed by the Trump administration. In 2017, Cuomo, California Gov. Jerry Brown and Washington State Gov. Jay Inslee formed the United States Climate Alliance – now encompassing 15 states (and Puerto Rico) and over $7.4 trillion worth of GDP – after Trump withdrew the United States from the Paris Agreement, an environmental accord under the United Nations Framework Convention on Climate Change negotiated by 195 countries and adopted by consensus at the 21st Conference of the Parties of the UNFCCC in December 2015.