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Cuomo joins other governors in fight to restore SALT deduction

WASHINGTON — Gov. Andrew M. Cuomo traveled to Washington Friday to unveil a multi-state effort to press President Trump and Congress to fully restore the state and local tax deduction, saying the limits on it in the 2017 federal tax overhaul are driving people and businesses out of New York and other Democratic states.

Noting that the change in the so-called SALT deduction has left the state's revenues $2.3 billion short of projections, Cuomo said New York was joining forces with other states to try to fight for change because they are facing similar struggles.

"We're here today to talk about basic tax fairness," Cuomo said.

The governors of New Jersey, Connecticut, Illinois and Oregon joined him at the news conference launching the new "Governors Coalition for Tax Fairness." Other governors are expected to join as well, Cuomo said.

At issue is the new $10,000 limit on the deductibility of state and local taxes, which was included in a massive 2017 tax overhaul bill backed by President Trump and congressional Republicans. Under previous tax law, taxpayers across the country could deduct all their state and local taxes.

"It's a gross injustice" to progressive states that collect such taxes, Cuomo said. "It was politically motivated, in my opinion."

To hear Cuomo and the other governors at the news conference tell it, the change put progressive states at a structural economic disadvantage. That's because it dramatically increased the federal tax bills of wealthy and even many middle-income homeowners, who now appear to be fleeing states like New York and establishing residency in lower-tax states.

To combat this, Cuomo and the other governors in the coalition plan to lobby the new Congress for a change in the tax law — something President Trump has said he is willing to consider.

Sen. Bob Menendez and Rep. Bill Pascrell, both New Jersey Democrats, have introduced legislation that would fully restore the SALT deduction and pay for it by raising the top personal tax rate from 37 percent back to 39.6 percent.

And while such legislation stands a strong chance of passage in the Democratic House, Cuomo acknowledged that it faces a challenge in the Senate. There, Senate Finance Committee Chairman Charles Grassley, an Iowa Republican, has already voiced opposition to the bill.

Nevertheless, Cuomo said he holds out hope that Congress will make the change, especially with governors from around the nation putting pressure on them.

"We have a coalition," Cuomo said. Noting that the governors have also filed a lawsuit against the limits in the SALT deduction, Cuomo added: "We're going to lobby to make sure Congress gets this on the top of the nation's agenda."

Other governors at the news conference echoed Cuomo's sentiments regarding the SALT deduction.

"This is politics masquerading as tax policy," said Gov. Phil Murphy of New Jersey, a Democrat.

"It is the art of the raw deal," said Gov. Ned Lamont of Connecticut, also a Democrat.

The governors appeared at the annual conference of the National Governors Association, which elected Cuomo as vice chair in December.

Still, the news conference had some notable absences.

Gavin Newsom, the new Democratic governor of high-tax California, did not attend. Neither did Gov. Larry Hogan of Maryland or Gov. Charlie Baker of Massachusetts — Republicans who lead high-tax states.

Like Trump, Rep. Tom Reed — a Corning Republican who serves on the tax-writing Ways and Means Committee — has said he would be willing to consider changes to the tax bill to ease the burden posed by the limits on the SALT deduction.

But Reed said Friday that the state ought to focus on its own fiscal problems.

"I will remind the governor that is the spending and taxing power of the state capital that is the root cause of the problem of residents of New York leaving the state because of that tax burden," Reed said. "As we have indicated to the governor, we should attack the root cause rather than try to ... misdirect this fight on the SALT."

Cuomo said, though, that the drop in state revenue resulting from the SALT change leaves New York's budget with a daunting revenue gap.

"There is no way to fill it," Cuomo said. "The last thing you want to do is raise taxes, so then you have to find cuts. And you have to find cuts in very, very tight budgets."

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