Albany, NY - January 26, 2017 - Governor Andrew M. Cuomo today announced that New York, New Jersey, and Connecticut have launched a coalition to sue the federal government to challenge the new GOP tax bill that eliminates full state and local tax deductibility. 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.
"New Yorkers will not stand idly by as the federal government fires an economic missile at the fiscal health of our state," Governor 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. 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 Governor Phil Murphy said. "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. 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. I am proud to have Governors Cuomo and Malloy join New Jersey in our efforts."
"The GOP tax legislation gave massive handouts to the wealthiest one percent and stuck middle class taxpayers with the bill," Connecticut Governor Dannel P. 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. 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."
The new federal law disproportionally impacts the State of New York, which already sends $48 billion more each year to Washington than it receives in federal dollars—a far more extreme "balance of payments" shortfall than any other state. According to a recent report released by the State Department of Tax and Finance, the elimination of full SALT deductibility alone will cost New York an additional $14.3 billion.
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 launch of a multi-state coalition to sue the federal government is the first step in Governor Cuomo's three-pronged effort to fight the federal tax assault on New York, as announced in his 2018 State of the State Address. The second prong of the effort is to launch a repeal-and-replace strategy, and the third prong is to explore the feasibility of a major shift in the structure of State tax policy.
On January 17, at the direction of Governor Cuomo, the New York State Department of Taxation and Finance released a preliminary report to outline options for aggressive state tax reform to thwart the federal tax legislation. The State will use this blueprint as a foundation to work with experts, the Legislature, employers, taxpayers, and other stakeholders to develop and implement necessary changes to the New York tax code.