Legislative and Regulatory Counceling
Report From The Hill
On July 17, 2018, Governor Andrew M. Cuomo and the NY AG, filed a lawsuit in UNITED STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OF NEW YORK.
“The lawsuit argues that the new SALT cap was enacted to target New York and similarly situated states, that it interferes with states’ rights to make their own fiscal decisions, and that it will disproportionately harm taxpayers in these states.” No offset from lower tax rates is cited.
NY, NJ and Connecticut, the plaintiffs, for a variety of reasons1 (18 in all), “…seek a declaration that the new cap on the SALT deduction violates the U.S. Constitution, and an injunction barring the new cap’s enforcement.”
The “variety of reasons” characterize as merely political, policymaker’s comments and suggest that such motives may not take the form of congressional enactment of laws. But that is how and why legislatures enact laws. Simply stated one cannot sue the legislature so the states are suing the treasury department and the IRS for enforcing the law. The court could issue in an injunction, a trend established by district judges trying to set national policies, decisions that usually undergo appeal to the circuit courts and to the USSC. But that takes time. To issue and injunction the court would have to find irreparable harm and or the likelihood of that state prevailing on appeal. It is highly unlikely the NY district would jeopardize its independence and reputation by allowing such an arcane politicization of the law.
Mr. Cuomo is feeling some political heat from his left, wants to fun for president in 2020 and is looking for reasons to divert attention from political scandals – he is not a target – a grim fiscal outlook and the loss of millions of dollars and resources from public unions whose political clout has been curtailed by the supreme court.
The diversion includes an attempt to capitalize on the likelihood of US Senate confirmation of Judge Kavanaugh by calling the legislature to reconvene in special session to protect women from repeal of Roe v. Wade.
Senate republicans have resisted despite a tentative hold on control at risk in the November election. Shifting enrollments in traditional republican districts show democrat margins and seats vacated by republicans could be lost absent the name recognition of incumbents and may even have figured in the retirement of long serving republican senators. Senate district enrollments do not look good for republicans.
In-play is the fate of the 7-member Independent Democratic Conference (IDC), as of April officially in the full embrace (with hugs and kisses) of senate democrat regulars. The unifying target is Donald Trump and primary challenges to each member of the conference to be decided September 13th. Primaries tend to have low turnouts and favor political activists who enabled the Bernie Sanders clone who unseated Congressman Joe Crowley (CD -14 Queens/Bronx). If the Conference members win their primaries it is unlikely the breakaway senators would reform into a coalition but a lawsuit the conference lost involved no penalty that would preclude such an arrangement. The suit involved a campaign fund the conference established that was declared in violation of the state election law. Yet it remains unclear that the ruling bars the use of the fund for reelection of conference members. The dems in the senate support the re-election of the IDC members but won’t give them any campaign funds. Lots of China has already been broken, so if IDC members prevail in the primaries there could be war.
• Policymakers openly talked about coercing States like New York to change their policy choices.
• Treasury Secretary Steve Mnuchin said that the change was intended to “send a message” to states to get them to change their taxation and fiscal policies.
• Stephen Moore, who advised the Trump campaign on tax policy, said it even more bluntly, calling the SALT changes “Death to Democrats.”
• The new provision will raise billions of dollars in federal taxes from New Yorkers and others in similarly situated states – including $14.3 billion from New York alone in 2018.
• By depressing home values, the new provision will hurt taxpayers in New York and other states, while also reducing state tax revenues – forcing states to choose between higher tax rates or cutting investments in education, public services, and other vital programs.
• The new cap on the SALT deduction also violates the constitutional principle of equal state sovereignty, by targeting a handful of states for unfavorable treatment based on their sovereign policy choices.