Coalition of US states to sue federal government over tax reform Coalition of US states to sue federal government over tax reform

Coalition of US states to sue federal government over tax reform
07 Feb 2018

The governors of New York, New Jersey and Connecticut have formed a coalition to sue the federal government over the constitutionality of December's federal tax overhaul.

They say the Bill, which repeals state and local tax deductibility, making it the first federal double taxation in US history, has an unfair impact on their particular states.

According to Reuters, New York governor Andrew Cuomo said there were “very strong” arguments that the Bill violates states’ rights as well as the Equal Protection clause in the US Constitution.

"The top 12 states that get hurt [by the Bill] coincidentally all happen to be Democratic states," he said.

The sweeping Republican tax Bill signed into law by president Donald Trump at the end of last year introduced a US$10,000 cap on state and local income and property tax deductions, known as SALT. The changes will affect many taxpayers in states with high incomes, property values and taxes, including New York, New Jersey, Connecticut and California.

Joseph Callahan, a tax and business attorney with the New York law firm Mackay, Caswell & Callahan, believes the states have a strong argument against the federal government.

"The concept of banding together in a multi-state coalition has been utilised in the past," he said. "The vehicle they are using is an appropriate vehicle, and the constitutional arguments that they raise are solid arguments."

But David Kamin, a professor at New York University’s School of Law, had doubts that a court case of this kind was likely to succeed.

Cuomo also hopes to offset the new tax law by creating opportunities for charitable giving and shifting the state to deducting payroll taxes. California, Illinois, Nebraska, Virginia and Washington are considering legislation that would allow taxpayers to donate to state funds and receive a dollar-for-dollar tax credit in return.

States are also considering whether to repeal state income taxes and replace them with an employer-paid payroll tax. Companies can still deduct payroll taxes under the new federal tax law. The expectation is that employers would pay taxes for their employees, and lower wages by the same amount, Cuomo explained.

 

Emma Woollacott is a freelance business journalist. Her work has appeared in a wide range of publications, including the Guardian, the Times, Forbes and the BBC.

The governors of New York, New Jersey and Connecticut have formed a coalition to sue the federal government over the constitutionality of December's federal tax overhaul.

They say the Bill, which repeals state and local tax deductibility, making it the first federal double taxation in US history, has an unfair impact on their particular states.

According to Reuters, New York governor Andrew Cuomo said there were “very strong” arguments that the Bill violates states’ rights as well as the Equal Protection clause in the US Constitution.

"The top 12 states that get hurt [by the Bill] coincidentally all happen to be Democratic states," he said.

The sweeping Republican tax Bill signed into law by president Donald Trump at the end of last year introduced a US$10,000 cap on state and local income and property tax deductions, known as SALT. The changes will affect many taxpayers in states with high incomes, property values and taxes, including New York, New Jersey, Connecticut and California.

Joseph Callahan, a tax and business attorney with the New York law firm Mackay, Caswell & Callahan, believes the states have a strong argument against the federal government.

"The concept of banding together in a multi-state coalition has been utilised in the past," he said. "The vehicle they are using is an appropriate vehicle, and the constitutional arguments that they raise are solid arguments."

But David Kamin, a professor at New York University’s School of Law, had doubts that a court case of this kind was likely to succeed.

Cuomo also hopes to offset the new tax law by creating opportunities for charitable giving and shifting the state to deducting payroll taxes. California, Illinois, Nebraska, Virginia and Washington are considering legislation that would allow taxpayers to donate to state funds and receive a dollar-for-dollar tax credit in return.

States are also considering whether to repeal state income taxes and replace them with an employer-paid payroll tax. Companies can still deduct payroll taxes under the new federal tax law. The expectation is that employers would pay taxes for their employees, and lower wages by the same amount, Cuomo explained.

 

Emma Woollacott is a freelance business journalist. Her work has appeared in a wide range of publications, including the Guardian, the Times, Forbes and the BBC.

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  • Posted On February 09, 2018 by Lee Hedges

    If I may offer a perspective. Please understand the U.S. is extremely polarized right now. This will go absolutely nowhere! This law is treating all states the same.

    Governor Cuomo is planning on running against Trump in 2020. This kind of talk plays well to those drinking the blue Kool-Aid! Does anyone seriously think companies will lower their employees’ wages to pay the taxes? In California, they are suggesting taking half of a company’s savings from the new tax bill.

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