Connecticut, New Jersey, and New York plan to file a lawsuit against the Trump administration for approving a new tax plan that limits state and local tax deductions.
The federal tax plan restricts deductions of local and state taxes to $10,000 a year. Congress expects the cap to generate an additional $668 billion in the next decade. However, some feel that the new plan will hurt high-income earners.
The governors of Connecticut, New Jersey and New York said the new law unfairly targeted wealthy states in the Northeast, which has already given back billions of more in taxes than they got back in return.
There is some worry that the new law will deteriorate home prices and make many people move to lower-tax states.
“New Yorkers will not stand idly by as the federal government fires an economic missile at the fiscal health of our state,” New York Gov. Andrew Cuomo (D) said. “The elimination of full state and local deductibility is a blatantly partisan and unlawful attack on New York that uses our hardworking families and tax dollars as a piggy bank to pay for tax cuts for corporations and other states.”
Connecticut Gov. Dannel Malloy said that the law hurts Connecticut taxpayers because they are expected to lose more than $10 billion in state and local tax deductions.
“Hundreds of thousands of residents could see a tax increase even as their property values decrease,” he explained.
Kim Holocher-Furletti, a New York-based web design consultant, is just one of the taxpayers who will be affected by this new law. She said that her family will try to use two-family status on their house and search for others ways to increase their business deductions.
“It’s not just the amount of your property taxes, it’s the figure the IRS uses to calculate the fed deduction on the tax form. SALT deduction on last year’s tax form was $24,000, but property taxes were $8,000. That $24,000 becomes $10,000 for 2018,” she told NBC News.
Jared Walczak, a senior tax policy analyst at the Tax Foundation in Washington D.C., doesn’t believe the lawsuit is rational. He said that there is some hypocrisy in the lawsuit because Democrats have always been for higher taxes for the rich.
“The same politicians who decried ‘tax cuts for the rich’ are now suing because the new tax law limits a tax break for the rich,” Walczak wrote.
There are several others who disagree with the lawsuit, including Western New York GOP Congressman Chris Collins. In a fundraising email, he wrote, “instead of accepting reality, King Cuomo has decided to waste even more of our state tax dollars to steal your federal tax cuts.”