Murphy says lawsuit challenging federal tax reform imminent

New Jersey Gov. Phil Murphy and his counterparts in New York and Connecticut said they'll sue within weeks to overturn a federal tax law that lowered rates for corporations and individuals while rolling back a deduction claimed by residents of high-tax states.

Murphy, New York Gov. Andrew Cuomo and Connecticut Gov. Daniel Malloy, all Democrats, said the Republican-sponsored tax law punished their states and other Democrat-led states by limiting to $10,000 the amount of state and local tax payments residents can deduct from their earnings in federal returns.

"It has nothing to do with sound policy making," Murphy said on a call with the other governors and reporters. "It's clear that it's political. It's punitive to blue states."

The governors said they plan to file a legal challenge in a federal court within two weeks.

Along with California Gov. Jerry Brown, the East Coast governors have hinted at a legal challenge since before President Trump signed the tax law Dec. 22. Their challenge rests on the idea that ending the unlimited deduction for state and local taxes would result in people being taxed twice on the same income.

"From an individual's point of view, this is clearly double taxation," Cuomo, a former state attorney general, said on the call with Murphy and Malloy. "Legally we believe there's a very strong argument this is unconstitutional.

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Some law professors disagree with that interpretation, noting that the federal government has broad authority to make tax policy.

The stakes are high for taxpayers in New Jersey. With property taxes that are among the nation's highest, 36 percent of New Jersey taxpayers write off their property taxes on their federal returns, trailing only Connecticut, according to the nonprofit Tax Foundation.