ALBANY — The governors of New York, Connecticut and New Jersey said Friday they will form a coalition and sue over the federal tax plan that limits state and local tax deductions.
Gov. Andrew Cuomo said the federal tax law approved last month by Congress and signed by President Donald Trump is an assault on blue states with high taxes, saying he believes it is unconstitutional.
The tax reform limits the deductibility of local and state taxes, including property taxes, to $10,000 a year, which hurts high-income earners.
Cuomo contended the federal law is illegal. The governors said they plan to file a lawsuit in the coming weeks -- perhaps with other states, too -- to try to overturn it.
"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 in a conference call with Connecticut Gov. Dannel Malloy and New Jersey Governor Phil Murphy.
All three are Democrats. They ripped the federal tax law, saying it targets wealthy states in the Northeast — which had already given back billions more in tax revenue to Washington than they get in return.
"This is an assault on those states," Malloy said. "I believe it is illegal. It is why we are standing up and saying this can’t happen."
Murphy said called it "an awful law," saying states need to fight back against the Republican policies in Washington.
The governors said they are formulating a plan on how and when to file a lawsuit.
Cuomo and the other states are also contemplating changes in state law, such as moving away from an income tax to a payroll tax or allowing residents to make charitable contributions to government as a way around the federal law.
"It has nothing to do with sound policy. It’s clear it’s politically motivated. It’s punishment of blue states like New Jersey, New York, Connecticut and others," Murphy said.
Five GOP House members in New York voted against the tax bill, while four voted for it, saying it will lower income taxes for their constituents.
Rep. Chris Collins, R-Clarence, Erie County, ripped Cuomo's attempt to sue in a campaign fundraising email. Cuomo and Collins have battled over the law's impact.
"Instead of accepting reality, King Cuomo has decided to waste even more of our state tax dollars to steal your federal tax cuts," the email said.
Cuomo said that even if some taxpayers would get a break, higher income New Yorkers would be hurt by the limited tax deductions and they might pack and move to a lower-taxed state.
"It’s repugnant to their philosophy," Cuomo said of Republicans who supported the bill.
"You chase out relatively high earners. You chase out businesses, you're less competitive for business because your taxes are now structurally higher in those 12 states (hurt by the law change) than the other states."
The governors didn't specifically say the grounds on which they will sue, but Cuomo cited the start of the federal income tax in 1862, which he said protects states' rights.
Experts, though, have questioned whether states can successfully fight the federal government's decision to limit tax deductions.
Some have pointed to Congress' power under the 16th Amendment to "lay and collect taxes on incomes," as well as two landmark court cases in U.S. history that upheld Congress' ability to alter tax deductions.
“As a general matter, nothing prevents the federal government from changing the SALT deduction,” David Gamage, a professor of tax law at Indiana University’s Maurer School of Law, told Reuters.
Cuomo's counsel Alfonso David, though, said it was too soon to start debating legal arguments, saying courts have historically "rejected government action that inappropriately targets a class of people," which he says in this case are Democratic-led states.
"We are exploring a variety of legal claims in responsive to this divisive SALT law," he said.
"So I would not draw any conclusions about what our causes of actions are going to be until the complaint is filed."