Gov. Andrew M. Cuomo (D-N.Y.) said Wednesday that New York state will sue the federal government over the new Republican tax law, but legal experts are skeptical the lawsuit will hold up in court.
Cuomo said New York will challenge a provision of the law that limits how much Americans can deduct from their federal taxes for payments made to state and local governments. Many of the people most affected by that provision live in states run by Democrats, which tend to have higher state and local tax rates.
Cuomo, widely seen as a potential contender for the Democratic presidential nomination in 2020, said the provision is “violative of states' rights and the principle of equal protection.”
“Washington has launched an all-out, direct attack on New York State's economic future,” Cuomo said at his “State of the State” address in Albany. “It is crass. It is ugly. It is divisive. It is partisan legislating. It is an economic civil war. Make no mistake: They are aiming to hurt us.”
The new GOP law caps how much taxpayers can deduct in state and local taxes at $10,000; previously, the deduction was unlimited. As a result, New York residents could pay an additional $14 billion in federal taxes, Cuomo said, and taxpayers in California, New Jersey and Illinois are also expected to pay more under the change. Gov. Phil Murphy (D-N.J.) told CNBC last month that “everything is on the table” in terms of combating the GOP law, including challenging its “legality and constitutionality” in court.
But constitutional law professors express doubt that the federal courts will seriously entertain striking down the GOP's cap on the deduction. They noted that Republicans had articulated justifications for ending the state and local deduction beyond a simple attempt to punish liberal voters, and argued that a successful lawsuit may in fact wind up harming progressive policy priorities in the long run.
“The overall incoherence of the bill is real, so I'm sympathetic to New York's claims,” said professor Darien Shanske of the University of California Davis School of Law. “But there are non-crazy arguments for getting rid of the deduction — there's a rational reason to get rid of it, even if it's one you disagree with.”
Cuomo's administration, working with state Attorney General Eric Schneiderman, is exploring a number of legal challenges. They could include arguments that the GOP plan violates the 10th and 14th amendments to the Constitution.
"New York State is exploring a variety of legal claims in response to the divisive federal SALT law," the state's chief counsel, Alphonso David, said in a statement. “The practical and intended impact of this law is to impose a disadvantage on 'blue' states. Courts have historically rejected government action that inappropriately targets a class of people and this should be no different."
Congress would have violated the 14th Amendment had Republicans passed a tax bill that, for example, specified that taxes be raised on Democratic voters and lowered on Republican voters. But the bill's defenders, and even some of its critics, say that there are nonpartisan justifications for capping the deduction. Speaker Paul D. Ryan (R-Wis.), for instance, argued throughout that the tax debate that eliminating or paring back the deduction would force blue states to lower their local taxes — not that doing so would help make lives miserable for coastal elites.
“The federal government is eliminating what had been an unfair benefit. The U.S. Constitution does not require that high-tax states can give themselves a large federal tax cut, which is essentially what SALT does,” said Brian Riedl, senior fellow at the libertarian-leaning Manhattan Institute, who added of the Cuomo lawsuit: “It's completely frivolous and there's no basis for it.”
Cuomo's other likely argument, that the GOP tax law violates the 10th Amendment's guarantee of state sovereignty, may also not stand up in court, according to Shanske. The 16th Amendment gives Congress the authority to institute a federal income tax, and the federal government has the authority to determine which deductions can be claimed.
“I think that's also a loser,” Shanske said of the 10th Amendment claim.
Michael Dorf, a constitutional law professor at Cornell Law School, has argued the provision could be struck down if it could be shown to have been designed to punish Democrats, perhaps under the First Amendment. But Dorf also acknowledged that the climb to a successful legal challenge to the new law appears steep.
“I think it's a good argument for public debate: In principle, legislators should not tax people based on their political affiliation,” Dorf said. “The hard part is in proving it in court.”