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Editorial: Governor's tax plan lawsuit isn’t frivolous

Editorial: Governor's tax plan lawsuit isn’t frivolous

Opposition to GOP plan leading to new ideas on taxation, new platform for tax-and-spend opponents
Editorial: Governor's tax plan lawsuit isn’t frivolous
Gov. Andrew Cuomo walks across the stage at the 2018 State of the State Address in Albany, Jan. 3, 2018.
Photographer: Peter R. Barber

Gov. Andrew Cuomo’s threatened lawsuit against the federal government over limits in the Republican tax plan on state and local tax deductions probably won’t get very far in the courts.

Legal experts say the federal government’s discretion over the collection of taxes is broad and that the arguments being made by Cuomo that the bill somehow discriminates against people living in Democratic states probably won’t rise to unconstitutional levels.

But that doesn’t mean the litigation is frivolous or that Cuomo’s guest appearances on national talk shows to complain about the Republican bill are frivolous.

In fact, the more the governor challenges the tax plan, the more he draws attention to it, the more he blusters about its unfairness and seeks legal avenues to stop it, the more we’re seeing options and alternatives being proposed that might actually benefit New Yorkers in the long run.

For instance, some have already discussed ways New York could sidestep the new federal limits on state and local tax deductions, and therefore not lose out on the benefit.

One idea is to restructure the current tax collection system by effectively replacing the income tax system with a system based on the payroll tax.

The idea is that because payroll taxes are taxed differently by the federal government than income taxes, New Yorkers would end up being able to keep more of their income.

But such a plan also could place more of a financial burden on already struggling businesses and have other unintended consequences, as articulated in a recent blog posting by E.J. McMahon, of the Empire Center for Public Policy.

He said taking such a step would have “mind-bending complications” for both employers and employees that could end up hurting both. Among the positives that could come out of such a change is a decrease in employees’ Social Security and Medicare taxes, said another expert.

While the details of such a complex shift in tax collection need to be worked out before it can be implemented, it’s one of those ideas that’s been put on the table as a direct result of the tax plan and one that will get more legitimate scrutiny as long as Cuomo continues to rail against the plan on TV and the courts.

Another idea for undermining the impact of the GOP tax bill, according to a New York Times article, involves allowing residents to replace their state income tax payments with tax-deductible charitable contributions to their state governments. Clever, right?

Already, the state has backed residents’ efforts to skirt the changes by allowing them to pay their 2018 property taxes in December — before the changes took effect. Other high-tax states made similar allowances. It’s a one-time savings, for sure, but it demonstrates how creative governments are getting in trying to limit the impact on their taxpayers of the federal changes.

Other than legal tricks and gimmicks, the GOP tax bill’s negative effect on high-tax states like New York, New Jersey and California is shining the spotlight on the practices in these states that have led to their high taxes — like excessive overall government spending, onerous labor laws that drive up the cost of doing of business in those states, and overly generous spending on social programs compared to other states.

House of Representatives Speaker Paul Ryan made no secret of the fact that the cap on the tax deductions had among its purposes the desire to force high-tax states to find ways to rein in their spending and cut their in-state taxes.

And that, in turn, is empowering forces that have long been critical of the state’s high spending, high taxes, overregulation and lack of accountability for spending initiatives.

For instance, in his response to the governor’s State of the State message, GOP gubernatorial hopeful and Assembly Minority Leader Brian Kolb said the speech was too focused on the federal government and he called for “decisive action that will reduce the cost of living for families, provide overdue assistance for job creators, reduce the burden of crushing unfunded mandates which drive up property taxes and earn back the trust of New Yorkers.”

If all the attention and criticism over the threatened litigation has done anything, it’s gotten leaders to face the problems that have put the state in this position and compelled them to think outside the box for solutions.

If the lawsuit over the GOP tax plan goes forward and Cuomo and the state eventually prevail, then we get our tax deduction back. A score for us.

If not, we all still might win — just in ways we hadn’t thought of before.
 

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