New Jersey to join multi-state lawsuit over federal tax reform

NJ Governor Agenda
New Jersey Gov. Phil Murphy speaks last week in Trenton.

New Jersey, New York, and Connecticut plan to sue the federal government over the constitutionality of the tax law  President Trump signed in December, the states’ governors announced Friday.

The three Democratic governors said they are forming a multi-state coalition to file a lawsuit against the federal government and believe that other states will join them.

“There is a very strong argument that the bill is a fundamental violation of states’ rights and repugnant to the very concept of federalism that formed this nation,” New York Gov. Andrew Cuomo said in a conference call with reporters Friday morning.

The governors said their top concern is the $10,000 cap placed on deductions of state and local taxes, which hurts residents in their states more than others because they have relatively high state income and property taxes.

The states most affected by the loss of that deduction are all led by Democrats. The governors said they believed the federal tax law was intended to discriminate along party lines.

“It’s clear it’s politically motivated,” said New Jersey Gov. Murphy, who took office last week. “It’s punishment of blue states … who already pay far more into the federal government than we receive.”

Connecticut Gov. Dannel Malloy called the new tax law a “frontal attack on the ability of our states to pay for things like education.”

The governors said they are also considering other options to fight the impact of the tax changes. Cuomo has proposed replacing New York’s state income tax with a payroll tax levied on companies for the wages they pay employees.

Murphy said in Friday’s call that he finds the idea of a payroll tax “quite compelling.” He said he is also interested in pursuing the option of establishing charitable foundations through which residents can make deductible donations instead of tax payments.

“We’re not ignoring other avenues,” Murphy said. “Our creative juices are flowing.”

Murphy said he signed a common interest agreement this week with New York, California, and Connecticut and expected other states to join them in filing a lawsuit in federal court in coming weeks.

“Somebody asked me, ‘Are you doing this symbolically?'” Murphy said. “And I said, ‘Heck no.’ “