Kill GOP tax law!
Suit says it unfairly targets N.Y., other blue states
ALBANY – After months of threats, Gov. Cuomo announced the filing of a lawsuit Tuesday to block an “un-American” and “repugnant” federal Republican tax reform law he says unconstitutionally targets New York and other blue states.
State Attorney General Barbara Underwood filed the suit in Manhattan Federal Court seeking a declaratory judgement to toss out the law. New Jersey, Connecticut, and Maryland also signed on.
“This is (President Trump and the Republican Congress') political attempt to hurt Democratic states,” Cuomo told reporters during a conference call. “It is totally repugnant and hypocritical of the fundamental conservative ideology which they preached.
“It is politically motivated and it was politically targeted,” he added.
Underwood said the GOP tax law goes “well beyond settled limits on federal power to impose an income tax, while deliberately targeting New York and similar states in an attempt to coerce us into changing our fiscal policies and the vital programs they support.”
At issue is the provision in the federal bill known as SALT, which restricts the federal deductibility of state and local taxes.
Cuomo has argued that the change severely impacts 12 high-tax blue states like New York that represent 40% of the Gross Domestic Product to help pay for tax cuts that will benefit mainly red states and the wealthy.
Under the new tax law, a person can now deduct on their federal taxes only up to $10,000 of their combined state and local income and property taxes.
The lawsuit charges the law effectively amounts to unconstitutional double taxation, a violation of states' rights and equal protection guarantees.
It also claims the law violates federal rules against imposing undue influence on states to get them to adopt policies preferred by the feds.
The lawsuit cites numerous public quotes from Republican supporters of the new law, including from Trump Treasury Secretary Steven Mnuchin, who said it was designed to “send a message” to states to get them to change their taxation and fiscal policies.
The legal challenge also says the law will depress home values while at the same time reducing state tax revenues, which will force the affected states to choose between higher tax rates or cutting investments in key programs.
Cuomo argues the law will cost New York $14.8 billion in revenue in 2018.
The state this year enacted legislation designed to lessen the impact of the federal tax law by allowing residents to claim deductions by donating to nonprofit entities that would be set up to help fund government services, like education. New York also created a voluntary payroll tax that would take the place of the state income tax impacted by the federal law.
The IRS, however, is looking into the legality of the state's moves.
Republicans lawmakers and others—including some who have been critical of the federal tax law— predict the lawsuit has little chance of success.
“I think it's clearly political in its intention,” said E.J. McMahon of the Empire Center for Public Policy, who has been critical of the tax law.
McMahon says the legal complaint presents good arguments in principle for why conservative politicians should not have passed the tax bill, because it's counter to federalist principles in the Constitution.
“But a mere political argument is not enough” to win a lawsuit, he said.
McMahon also argued there is no evidence that property values will fall as a result of the law in New York. He said since the law passed, home values on Long Island and in Westchester County have risen.
But Cuomo said he believes the lawsuit is strong enough to even win over a conservative-leaning U.S. Supreme Court.
“I think this case is so strong and the reason even (Trump's) politcally stacked Supreme Court would have a problem ruling in favor of SALT is because it is violative of the Founding Fathers' vision,” he said.