4 states sue over cap on federal deductions

Four states sued the federal government on Tuesday to void the new $10,000 cap on federal deductions for state and local taxes included in President Trump’s 2017 tax overhaul.

The lawsuit by New York, Connecticut, Maryland and New Jersey came seven months after Trump signed the $1.5 trillion overhaul passed by the Republican-led Congress, which cut taxes for wealthy Americans and slashed the corporate tax rate.

Critics have said the cap would disproportionately harm “blue” states that tilt Democratic.

Tuesday’s lawsuit adds to the many legal battles between such states, including several with high taxes, and the Trump administration, which was accused of unconstitutionally intruding on state sovereignty by imposing the cap.

— Reuters

Ex-Toys R Us workers seeking severance pay

Former Toys “R” Us workers will ask a bankruptcy judge to give them severance pay, which could give them the same repayment priority as the lawyers, financial advisers and suppliers who were considered vital to winding down the toy retailer’s U.S. operations.

Toys “R” Us has agreed to give the workers until July 23 to file the request, according to a July 16 court document, leaving the possibility open that a severance agreement could be reached. The company also said it reserves the right to fight the claim.

By submitting a so-called administrative claim in Toys “R” Us’s bankruptcy liquidation, the 33,000 workers are setting up a confrontation with other creditors given high priority under the U.S. bankruptcy code. Any severance deal that uses Toys “R” Us’s shrinking pool of money would need court approval and would probably be opposed by other creditors.

— Bloomberg News

Also in Business

The U.S. Senate on Tuesday voted 66 to 33 to approve a key Federal Reserve official to serve a full term on the central bank's board of governors. Randal Quarles assumed responsibilities as the Fed's vice chair for supervision in October, but Tuesday's vote grants him a
14-year term as governor, a role he held temporarily. Quarles was appointed by President Trump.

U.S. industrial production rebounded last month after being dragged down in May. The Federal Reserve said Tuesday that industrial production — which includes output at factories, mines and utilities — climbed 0.6 percent in June, recovering from a 0.5 percent drop in May. The May reading was warped by a fire at a Michigan parts factory that disrupted production of Ford Motor's F-series pickup trucks, the nation's best-selling vehicle. Factory production rose
0.8 percent last month after falling 1 percent in May. Mining output increased 1.2 percent in June, its fifth straight monthly gain. Utility production dropped 1.5 percent.

From news reports

Coming today

8:30 a.m.: Commerce Department releases housing starts for June.

2 p.m.: Federal Reserve releases beige book.

Earnings: American Express.