The states of New York, New Jersey, and Connecticut are planning to sue the federal government over the Republican-led tax reform bill, which President Donald Trump signed into law late last year.
Among the Tax Cuts and Jobs Act’s many changes to the nation’s tax laws is the elimination of certain state and local tax deductions, often referred to as SALT deductions.
The tax bill installs a cap of $10,000 on SALT deductions, but several states (including New York, New Jersey, and Connecticut) have state and local tax burdens that far exceed $10,000, as noted in this report from CNBC.
In 2015, the average New Yorker's SALT deduction was $22,000. Meanwhile, residents in New Jersey and Connecticut claimed nearly $20,000 in SALT deductions.
In a statement released Friday by the office of New York Gov. Andrew Cuomo, the three states say that the tax bill SALT provisions unfairly target residents in each state.
“This 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,” Cuomo’s office said in the statement.
To that end, New York, New Jersey, and Connecticut are forming a coalition to sue the federal government over the tax plan.
“New Yorkers will not stand idly by as the federal government fires an economic missile at the fiscal health of our state,” Cuomo said.
“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,” Cuomo continued. “This coalition will take the federal government to court to protect our residents from this assault.”
Each of the three states’ governors say that their residents will be harmed by the tax plan.
“The GOP tax legislation gave massive handouts to the wealthiest one percent and stuck middle class taxpayers with the bill,” Connecticut Gov. Dannel Malloy said.
“In short, this law does real harm to Connecticut taxpayers, who stand to lose over 10 billion dollars in state and local tax deductions,” Malloy added. “Hundreds of thousands of residents could see a tax increase even as their property values decrease. The coalition we launch today will fight against the discriminatory impacts of this shortsighted and damaging Republican law on our states.”
Each of the three governors is a Democrat, including New Jersey Gov. Phil Murphy, who was sworn in 10 days ago and pledged to operate much differently than his Republican predecessor, Chris Christie.
“Capping the State and Local Tax deduction had nothing to do with sound policy. 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.
“We will not stand by and allow this to happen. 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,” Murphy added. “I am proud to have Governors Cuomo and Malloy join New Jersey in our efforts.”
According to the CNBC report, the governors expect other states to join the lawsuit.