“This clearly discriminates against our states, our economies. It is fundamentally unfair and illegal”

Legal Insurrection readers will recall the California legislature’s attempt to create a special government fund as a “charity” for taxpayer donations to mitigate the loss of state and local tax (SALT) deductions in the recently passed GOP tax plans.

The politicians must have realized the approach was full of fail, so now leaders of several blue states are planning a lawsuit to block the entire overhaul package. California may join in.

New Jersey and Connecticut are joining New York in planning to file a lawsuit to block the Republican-led federal tax overhaul, the Democratic governors of the three states announced Friday. And California could join them. Andrew Cuomo of New York, Dannel Malloy of Connecticut and Phil Murphy of New Jersey announced Friday that they’re talking to leaders of other states that stand to be hurt by the federal tax plan that’s expected to cost taxpayers in their states billions of dollars. “We’re going to be working together to form a multistate coalition to challenge this in court,” said Cuomo, a potential 2020 White House contender who announced his intention to fight the tax overhaul earlier this month.

I am a little shocked the the Golden State generals in the War on Trump are not leading this charge. The suit is expected to be launched shortly.

Murphy said he expects the suit to be filed within weeks. No decision has been made on where the action will be filed, Malloy said. The new tax code passed by Republicans in Congress and signed into law last month by Republican President Donald Trump caps a deduction for state and local taxes at $10,000. That deduction had been popular in high-tax, Democratic states like New York, Connecticut and New Jersey, where many homeowners now face big increases in their federal tax bill. “This is an assault on those states,” Malloy said.

Malloy asserts the law isn’t legal. Specifically, the three governors cite the rules developed at the time of the first national income tax tax, set during the Civil War.

Cuomo invoked a law signed in 1862 by Lincoln — who approved the first national income tax — that he said demonstrates that state and local deductions of taxes are protected by “state’s rights” and to avoid “double taxation.” “This violates both principles clearly,” said Cuomo, speaking alongside Connecticut Gov. Dannel Malloy and new New Jersey Gov. Phil Murphy — all Democrats. “This clearly discriminates against our states, our economies. It is fundamentally unfair and illegal,” agreed Malloy.

The lawsuit is still in the process of being prepared, but counter-arguments to the premises based on the 1862 rules are already being honed.

Bloomberg offers a humorous and in-depth look at the Blue States’ desperation at the loss of the SALT deductions and all of their proposed solutions. The assessment of the legal experts consulted on this particular proposal is that the governors’ case is dead-on-arrival:

…[The lawsuit] is an intriguing strategy. But alas for the citizens of New York State, probably a doomed one. I spoke to Michael Dorf, a law professor at Cornell who recently outlined the possible lines of attack that such a suit could take. For one thing, they could argue federalism, a tack that even conservative judges should find appealing. “There’s an argument that the Sixteenth Amendment does not empower the federal government to treat money that is owed to state and local governments as part of the tax base,” he said. “If you go back to the Sixteenth Amendment it’s clear that states were concerned about this at the time of the drafting.” The problem? “The hard part there for the plaintiff states, while that was a concern for the people who adopted the Sixteenth Amendment, it’s not anywhere in the amendment.” …Jonathan Adler, who teaches law at Case Western, was even more pungent, and succinct. While we don’t know what form the complaint will eventually take, since the states haven’t yet drafted it, “What we have seen [so far] would suggest that there is some sort of constitutional right to a SALT deduction. To state the claim is to refute it.”

Imagine, if you will, that this lawsuit is successful. Then, ponder the likely response of a voting age, tax-paying American who receives his first paycheck after the block.

The election commercials practically write themselves.

It’s too bad embracing lower taxes and practicing fiscal responsibility isn’t an option for these governors.



