Four Blue States Sue Over Tax Reform. It May Be the Dumbest 'Resistance' Lawsuit Yet.
S E E D E D C O N T E N T
Who's up for some stupid, resist-y blue state posturing that will almost certainly end up being a colossal waste of taxpayer dollars and resources? New York liberals, that's who. If you click on the tweet below and open it on your browser, you'll see scores of responses from Empire State Democrats cheering on their state Attorney General's meritless, doomed stunt, which purports to seek the invalidation of a duly-enacted federal tax provision based on...well, something . There's some legal jargon thrown in here, but this little misadventure is truly nothing more than pure signaling. She might as well just come out and say, "we're suing Republicans because we don't like them and don't think they should be in charge of things:"
Several state-level Obamacare lawsuits were built on fairly solid constitutional claims, eventually worming their way up to a closely-divided Supreme Court. Likewise, a number of state-based challenges to Trump policies, including the original travel ban, resulted in challenges, injunctions and mandated alterations. This farce, however, is headed nowhere:
The 2017 federal tax law, which resulted from a hyper-partisan and rushed process, drastically reduced the deduction by capping it at $10,000. An analysis by the New York State Department of Taxation and Finance shows that the cap will increase New Yorkers’ federal taxes by $14.3 billion in 2018 alone , and an additional $121 billion between 2019 and 2025. As set forth in the complaint, the law flies in the face of centuries of precedent, which establishes constitutional limits on the federal government’s ability to use its tax power to interfere with the sovereign authority of the states. For the entire history of the United States, every federal income tax law protected the sovereign interests of the states by providing a deduction for all or a significant portion of state and local taxes. This uninterrupted history demonstrates that the unprecedented cap on the SALT deduction is unconstitutional , as the lawsuit notes.
The federal legislature capping a federal tax deduction, evenly applied across all 50 states, is 100 percent constitutional. New Yorkers (and residents of a handful of liberal northeastern states who've signed onto this silliness) enjoy no constitutional "right" to have any particular portion of their state and local taxes eligible to help defray their federal tax bill. Ed Morrissey scoffs at this nonsense:
There is nothing in the Constitution that requires the federal government to reimburse the cost of state taxes, which are after all entirely within the control of the state. There is no such thing as an “uninterrupted history” clause within the Constitution...Had the bill singled out New York for disparate treatment, that might be grounds for judicial intervention, but it doesn’t. It sets the same $10,000 cap on deductions in all states, a level which ensures that the only people impacted by this policy will be those in the top quintile of earners nationwide anyway. The argument that a federal tax policy applied evenly across all states somehow violates state sovereignty and acts in a discriminatory fashion is equally absurd. The reform bill has no direct impact on the rights of states to set and collect their own taxes. Congress has its own sovereignty and is not required to indemnify states from the impact of their tax policies.
Philip Klein cuts to the chase : "This is a completely idiotic lawsuit. Idea that limiting a federal tax deduction in a way that applies equally to all states is a violation of state sovereignty is absurd." Meanwhile, Morrissey sees an obvious remedy for elected officials in New York and elsewhere who profess to be terribly concerned about their citizens feeling more of the full brunt of their state tax burden: "New York’s sovereignty is precisely the solution for this issue. Cuomo and the New York legislature can simply change their tax code to save their citizens the extra cost, which originates from the state of New York and not from Congress. They want the money without the political headache, and they want the federal judiciary to rescue them from the consequences of their high-tax policies. This is just a threadbare attempt to shift the blame for those tax policies." Exactly. Under the pre-reform regime, taxpayers from moderate- to low-tax states effectively subsidized high-tax state residents because the latter group could write off those taxes when filing their federal returns. The new law levels the playing field by limiting that deduction to $10,000 across the board (in order to help offset the on-paper cost of lowering individual and corporate rates).
If taxpayers in tax-happy states start to feel a greater pinch because of the heavier levies imposed upon them by their state representatives and governors, they can demand that those representatives reduce their taxes, vote for new representatives who prioritize lower taxes and fiscal restraint, or move to a place where more appealing laws are on the books. Suing the federal government as a "solution" is a legal and intellectual dead end. But winning, I suspect, isn't really the point here. The point is to appease a political constituency that wants to see "progressive" politicians doing something , no matter now frivolous or dumb. Ironically, what New York et al are attempting in this case is a demanding an effective tax cut for the rich. Roughly 80 percent of households (and 91 percent of middle income households in 2018) are getting a tax cut under the new law, and the overwhelming majority of filers take the (now doubled) standard deduction, rather than itemize. So the relatively tiny portion of "victims" of the newly-capped deduction are wealthy itemizers from rich, blue states:
Why are Democrats from New York, New Jersey, Connecticut and Maryland insisting that rich people in their states get special treatment? Why would they risk jeopardizing middle class tax relief to help the wealthiest? I could have sworn they're supposed to be against such things. I'll leave you with a reminder that this isn't even the most moronic political gambit to come out of New York within the last week or so. That dubious honor goes to Governor Andrew Cuomo , who allegedly has a law degree:
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“The federal legislature capping a federal tax deduction, evenly applied across all 50 states, is 100 percent constitutional. New Yorkers (and residents of a handful of liberal northeastern states who've signed onto this silliness) enjoy no constitutional "right" to have anyparticular portion of their state and local taxes eligible to help defray their federal tax bill. Ed Morrissey scoffs at this nonsense:
Philip Klein cuts to the chase: "This is a completely idiotic lawsuit. Idea that limiting a federal tax deduction in a way that applies equally to all states is a violation of state sovereignty is absurd." Meanwhile, Morrissey sees an obvious remedy for elected officials in New York and elsewhere who profess to be terribly concerned about their citizens feeling more of the full brunt of their state tax burden: "New York’s sovereignty is precisely the solution for this issue. Cuomo and the New York legislature can simply change their tax code to save their citizens the extra cost, which originates from the state of New York and not from Congress. They want the money without the political headache, and they want the federal judiciary to rescue them from the consequences of their high-tax policies. This is just a threadbare attempt to shift the blame for those tax policies." Exactly. Under the pre-reform regime, taxpayers from moderate- to low-tax states effectively subsidized high-tax state residents because the latter group could write off those taxes when filing their federal returns. The new law levels the playing field by limiting that deduction to $10,000 across the board (in order to help offset the on-paper cost of lowering individual and corporate rates).
If taxpayers in tax-happy states start to feel a greater pinch because of the heavier levies imposed upon them by their state representatives and governors, they can demand that those representatives reduce their taxes, vote for new representatives who prioritize lower taxes and fiscal restraint, or move to a place where more appealing laws are on the books. Suing the federal government as a "solution" is a legal and intellectual dead end. But winning, I suspect, isn't really the point here. The point is to appease a political constituency that wants to see "progressive" politicians doing something, no matter now frivolous or dumb. Ironically, what New York et al are attempting in this case is a demanding an effective tax cut for the rich. Roughly 80 percent of households (and 91 percent of middle income households in 2018) are getting a tax cut under the new law, and the overwhelming majority of filers take the (now doubled) standard deduction, rather than itemize. So the relatively tiny portion of "victims" of the newly-capped deduction are wealthy itemizers from rich, blue states:
Why are Democrats from New York, New Jersey, Connecticut and Maryland insisting that rich people in their states get special treatment?”
Poor high tax big blue states. All upset because the new tax law treats everyone from every state to the exact same deductions for mortgage interest and state and local taxes. It’s interesting to watch democrats rush to the defense of high income rich people.
this lawsuit does not have a snowball's chance in hell... or even gloabal warming.
cheers
You get your info from your spam folder don't you?
The states most dependent on the federal government are who you'd least expect
2018’s Most & Least Federally Dependent States
All your states are off the topic of the seed and ignore the fact that tax dollars from Tennessee, Florida, Texas, Nevada and others were going from these no to low state income tax states to subsidize the high state and local tax state wealthy tax payers.
Some of these states have allowed their property values to go up well over what they should be worth. Of course what a person will pay is basically what a home is worth.
Seems the country always does better when blue.
perhaps the country used to do better when blue... but that paradigm has been shattered by trump.
trumps economy has set historic records. the most notable are:
those people vote.
and when it comes to jobs? no politician alive today can make the case they can do better than trump.
why? because they have already failed in the past to do what trump has done in only a couple years.
the old paradigm has been shattered to bits and pieces. making for the greatest show on earth.
cheers
I like your well reasoned post. Great points made that are right on target 🎯.
Blue urban areas have created scarcity by over regulations, NIMBYism, and rent controls to limit the production of new affordable ownable housing, thus driving the cost of existing housing sky high. So you have poor living in rent controlled or low income rental units. The retired with homes paid off in a different era, and the rich who can afford the existing prices. The working class and middle class are largely absent in those environments and gentrification is driving them out of the few remaining areas they were in.
And the loons get crazier!
See3.1.3
Not true here either.
I believe the governor of New York promised to sue the Supreme Court if Roe was overturned.
You can't make up the crazy.
And there I thought the progressives were in favor of increasing taxes on the high earners.. guess they are except when the high earners are themselves.
They are upset because the wealthy in other states were subsidizing the high tax rates the wealthy in big blue states. Now the red state rich get to keep their own money and the blue state rich are exposed to the full effect of their combined local, state, and federal taxes.
snicker, way to spin the red welfare states my tax money goes to prop up. And you have the nerve to call that chart 'off topic'?
Ain't that the truth!
There are no welfare states. The fact is that the federal government spends money on military and nasa facilities that are largely in red states as well as national parks. Also there are blue districts in many red states that are the poorest parts of those states.
Actually, it isn’t. I’m just glad that I for now live in a part of California that will never be impacted by the cap on mortgage interest deductions and state and local income tax deductions. I think it’s great that those well off to rich people 🤑 in our coastal urban areas get to finally pay their fair share of taxes.
I can’t wait to see the tax increases the top 20% in those four states are going to pay.
It will be interesting when SoCal and Bay Area city residents start filing their 2018 tax returns and balance the rate cuts and standard and child deductions doubled and the mortgage interest and state and local taxes deductions capped and see how it all turns out. There are precious few homes (mansions) up here with a mortgage over 750,000 and not many that pay over 10,000 in state and local taxes. Silicon Valley can read em and weep on the personal level though the employers will do well bringing capital home from abroad.
At what point do I tell billionaires to fuck off no matter their political leaning?
Tom Steyer and George Soros come to mind.