Politico

Blue state governors promise to fight federal tax overhaul

Written by Lisa

Three Democratic governors pledged Monday to do everything they can to stop the emerging federal tax overhaul — even sue.

During a joint conference call with reporters, California Gov. Jerry Brown, New York Gov. Andrew Cuomo and Gov.-elect Phil Murphy of New Jersey denounced the bill heading toward a congressional conference committee as “dangerous,” “fraudulent,” “nefarious,” “a scam” and “trickle down on steroids.”

“Our states are key elements of the American engines of prosperity,” Brown said. “They’re attacking the vital sinews of the American economy, and it’s really stupid and they will regret it, and we’ll do everything we can to convince our Republican representatives to defeat this bill.”

In particular, the governors continue to target their ire at the bill’s curtailment of the federal deduction for state and local taxes. Those taxes are now deductible, but the emerging legislation would cap property tax write-offs at $10,000 and eliminate all income tax write-offs. It would also end the deductibility of interest on mortgages of more than $500,000.

While these amounts seem reasonable in the heartland, many people working in New York, New Jersey and California can make $200,000 and pay more than $10,000 a year in property taxes in homes that are hardly mansions. Cuomo’s office estimates that 3.3 million New Yorkers will save $17.3 billion this year by writing off state and local taxes; in California, Brown said, it’s nearly $40 billion.

“I believe it puts them at a structural, competitive disadvantage,” Cuomo told reporters on the Monday afternoon call. “This actually aggravates and enhances the injustice, where we are subsidizing the other states and now you’re using New York, California and New Jersey to subsidize the other states. It’s political retaliation through the tax code.”

The states’ six U.S. senators are all Democrats and they all opposed that chamber’s tax bill when it passed, 51-49, just after midnight on Friday. But the governors said they feel they have some leverage in the House of Representatives, where New York has nine Republican representatives, New Jersey has five and California has 14.

When the House advanced its tax bill in November, five New Yorkers, three Californians and four New Jersey representatives crossed party lines to vote against the measure, which passed, 227-205. POLITICO, citing multiple sources, reported Monday that Speaker Paul Ryan and his leadership team discussed replacing New Jersey Rep. Rodney Frelinghuysen, chairman of the powerful House Appropriations Committee, after he voted against the GOP bill.

During Monday’s conference call, Cuomo, whose father, Mario Cuomo, was governor at the time, noted that blue state representatives from both sides of the aisle united to thwart a 1985 attempt to roll back the SALT deduction.

“It’s not over yet. We may be in the ninth inning — each of our states has Republican members of the House, and I would say this is beyond Republican or Democrat,” Murphy said. “It’s a clear question: Are you representing your constituents … or are you in with President [Donald] Trump and this wrong-headed leadership in Congress?”

The tax bill has its vocal supporters in those states who are unlikely to flip. In New York, Reps. Tom Reed and Chris Collins both say that their constituents won’t feel the bite of high taxes like New Yorkers in richer, downstate areas. The higher costs, they say, are outweighed by economic growth they hope will come from the tax bill, and that it is up to Cuomo to cut state taxes.

Republican Rep. Tom MacArthur, the sole member of New Jersey’s congressional delegation to support the bill, said Murphy was being hypocritical since he ran on a campaign platform of raising taxes in the state by $1.3 billion.

“If the governor-elect is so concerned about higher taxes in New Jersey, than why is he planning to raise them?” MacArthur said when reached by phone. “I have been working in Congress to provide tax cuts for my constituents while Democrats in my state continue to raise them on New Jersey’s families.”

MacArthur rejected the characterization from Democrats of trickle down economics, citing provisions in the bill that increase the standard deduction and child tax credit, among others.“This is building up from the middle out, this isn’t trickle down. The people under this bill who are getting a tax increase are the wealthy,” he said.

A conference committee of lawmakers from the House and Senate is expected to form next week. Leaders in Congress say they hope to have a bill for Trump to sign by Christmas.

If that happens, the governors said, they will consider legal action. Since the federal income tax was imposed just before World War I, it has excluded state and local taxes.

“We are looking at the legality now,” Cuomo said. “This has been in the tax code since it started, over 100 years. This is double taxation — they are taxing taxes.”

Murphy agreed that he would “tear up the floorboards” to look for an avenue of legal relief.

Cuomo, who is positioning himself for a potential 2020 presidential bid, also said there would be political consequences if the bill takes effect.

“If they do this, the next day we’re going to start the repeal and replace the divisive tax act,” he said.

Ryan Hutchins, Carla Marinucci and Katie Jennings contributed to this report.

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