Multi-state coalition seeks to stop GOP federal tax reform: Cuomo

ALBANY — Gov. Cuomo and the governors of Connecticut and New Jersey announced Friday the formation of a multi-state coalition that will file a lawsuit seeking to block the recently enacted Republican federal tax reform act they say unconstitutionally targets their states.

Cuomo, New Jersey Gov. Phil Murphy and Connecticut Gov. Daniel Malloy made the announcement on a joint conference call with reporters Friday morning.

“There is a very strong argument that the bill is a fundamental violation of states' rights and repugnant to the very concept of federalism that formed this nation,” Cuomo said. “There is a very strong argument that it's a violation the equal protection clause.”

The three states have signed “a common interest agreement” and Malloy said he expects the lawsuit would be filed in federal court “in a couple of weeks.”

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Cuomo said they are looking at pursuing a temporary restraining order, though he acknowledged that it is hard to get.

Malloy said they are speaking with other states negatively impacted to join the suit and expect to make further announcements in coming days.

“We believe substantively there is a very strong case and the more like-minded states that join us, the better your shot,” Murphy said.

At issue is the provision in the federal bill known as SALT, which severely restricts the federal deductibility of state and local taxes.

The three governors say the change severely impacts 12 high-tax blue states like theirs that represent 40% of the gross domestic product to help pay for tax cuts that will benefit the wealthy and mainly red states.

Under the new tax law, a person can now only deduct on their federal taxes up to $10,000 of their combined state and local income and property taxes.

The three governors said the change amounts to unconstitutional double taxation, a violation of states' rights and equal protections guarantees.

The three governors said the case could ride on the discovery phase that could show emails between the White House and Congress proving that states were targeted for political reasons.

“Coincidentally, they are states that President Trump lost in the last election,” Cuomo said.

Cuomo again called the federal action an “economic missile” aimed at New York and has argued the change could drive wealthy New Yorkers from the state, which will put more pressure on the middle class to make up for the lost tax revenue.

Republican supporters of the plan — and even some who voted against it — said the state should get its own tax and spending under control.

In addition to the change on the federal level, a number of actions taken by the feds will automatically drive up some state taxes paid by New Yorkers by a combined $1.5 billion unless the state take specific action to stop it.

That's because the state tax code is tied to the federal one, meaning if the state doesn't act, the federal provisions limiting deductibility of property taxes and other itemized deductions would also severely reduce what residents can deduct on their state returns.

The state Senate this week passed a bill to de-couple the state and new federal tax code. Cuomo has said he will seek to address the situation as well in coming weeks.

Cuomo is also looking at ways to revamp the state tax code — including creating a state payroll tax paid by employers to replace much of the income tax paid by employees.

He said Democrats will also push for a repeal of the federal tax law and highlight the issue during the upcoming congressional elections.

Cuomo on Friday said he believes the tax bill is only the first issue where the federal government will seek to hurt the blue states.

"This is an authoritarian President who controls both houses," he said. "They are highly partisan. The tax bill vote was purely partisan. You see it now with the immigration debate. I would not be surprised if there weren't other issues where the federal government is trying to trample states' rights and impose their political dogma on the states."