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NY, NJ, CT to Sue Feds Over Tax Reform Impacts

Photo of Gov. Cuomo Gov. Cuomo has also expressed support for a bill that would restore full SALT deductibility.

ALBANY—The states of New York, New Jersey and Connecticut have formed a coalition that intends to file suit against the federal government over the recently enacted federal tax reform law.

The suit, which has yet to be filed, specifically targets changes made to state and local tax deductibility. The Tax Cuts and Jobs Act caps state and local tax (SALT) and property tax deductions at $10,000. The provision is expected to hurt high-tax states, such as New York, New Jersey and Connecticut.

In the coalition’s announcement, it states that the provision “effectively preempts the states’ ability to govern by reducing the ability to provide for their own citizens and unfairly targets New York and similarly situated states in violation of the Constitution.” The coalition believes that tenets of the federal tax reform law constitute double taxation.

The announcement continues to echo the complaints by the respective governors of the impacts federal tax reform will have on their respective states. Published reports indicate that additional impacted states may join the coalition in fighting the SALT deduction changes. Gov. Cuomo promised earlier this month in his State of the State address to file suit against the federal tax reform law.

“The elimination of full state and local deductibility is 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,” Gov. Andrew Cuomo says. “This coalition will take the federal government to court to protect our residents from this assault.”

“Capping the state and local tax deduction had nothing to do with sound policy,” New Jersey Gov. Phil Murphy says. “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. We will not stand by and allow this to happen.”

“The GOP tax legislation gave massive handouts to the wealthiest one percent and stuck middle class taxpayers with the bill,” Connecticut Gov. Dannel P. Malloy adds. “In short, this law does real harm to Connecticut taxpayers, who stand to lose over $10 billion in state and local tax deductions.”

New York Gov. Cuomo is taking a number of significant steps to address the expected revenue shortfalls, including the launch of a repeal-and-replace of the federal tax reform law campaign and the study of the feasibility of a major shift in the structure of state tax policy.

The governor in his recent budget address proposed reforming the state income tax structure from an employee-paid system to an employer-paid based system. He also proposed a host of revenue raisers geared at helping the state close a more than $4-billion budget deficit, including a possible congestion pricing plan for sections of Manhattan.

Gov. Cuomo has also expressed his support for a bipartisan bill introduced in Congress earlier this month that would restore full SALT deductibility.

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