Gov. Andrew Cuomo's State of the State: NY to sue over federal tax law

ALBANY — Gov. Andrew Cuomo said New York will sue over the federal tax overhaul signed into law last month, calling it unconstitutional and an "assault on New York."

In his State of the State address Wednesday, Cuomo continued to rail against the tax bill approved by the Republican-controlled Congress and signed by President Donald Trump.

He said he will sue over the law and look to reform New York's own tax code, perhaps through the payroll tax, in response to the federal action.

"We believe it is illegal, and we will challenge it in court as unconstitutional," Cuomo proclaimed to a standing ovation.

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Cuomo, who is seeking re-election in November and a prospective presidential candidate in 2020, has threatened a lawsuit over the law for weeks, saying it targets blue states like New York.

He said New York provides more than $40 billion more to Washington than it receives in return — a disparity that he says will get worse under the new tax reform.

Republicans, however, have disagreed with Cuomo's assertions, saying most New Yorkers will see lower income taxes under the federal overhaul.

The standard deduction is nearly doubling and income tax rates are falling.

"I was proud to deliver significant tax cuts for millions of working families across New York," said Rep. Chris Collins, R-Clarence, Erie County.  

"Perhaps Governor Cuomo should focus more of his efforts on doing the same.”

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Cuomo said his public campaign against the law will be called "Tax Fairness for All," and he will explore "a plan to restructure the current income and payroll tax system."

Specifics of his plan will be released when Cuomo proposes his 2018-19 state budget for the fiscal year that starts April 1.

But he hinted at looking at ways to change the state's payroll tax to avoid a major hit from the federal government.

In particular, the federal tax law caps income-tax deductions at $10,000 for state and local taxes — which hurts high-tax states like New York.

"We are developing a plan to restructure our tax code to reduce reliance on our current income-tax system and adopt a statewide payroll tax system," Cuomo said.

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He suggested the state will look to establish new charitable organizations so residents can still donate and take the income-tax deduction.

And he said he will look to close the so-called "carried interest loophole," a tax break that largely benefits Wall Street.

"If we do not fix this problem, it is a question of the state of New York’s viability long-term," he continued. 

The state Business Council cautioned against any tax plan that would hurt companies, saying it would be a step backwards from laws in recent years aimed at improving New York's business climate — which has ranked among the worst in the nation.

"We have major concerns with a new payroll tax and with increasing business taxes to offset reductions in federal taxes," said the group's president, Heather Briccetti.

"As the governor and the Legislature begin to tackle what will surely be a difficult budget season, we ask that they remember these simply words, 'First, do no harm.'”

JSpector@Gannett.com

Joseph Spector is chief of USA TODAY Network's Albany Bureau.

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