Governor-elect Phil Murphy said Thursday that New Jersey and other states could sue the federal government if a proposed Republican tax overhaul becomes law.
Murphy, a Democrat, said he has spoken with leadership in New York and California and with legal scholars about doing “whatever it takes” to stop a GOP attempt to rewrite the federal tax code. Asked if that included a joint lawsuit with other states, Murphy said “emphatically, yes.”
A Senate tax bill would eliminate the State and Local Tax (SALT) deduction, something that would particularly hurt high tax states such as New Jersey, New York and California. A House bill that passed this month would remove the deduction only for state and local income and sales taxes, but cap it at $10,000 for property taxes.
“Some of the leadership in those states have used the phrase, ‘it’s an unconstitutional double tax,’” Murphy said after an unrelated transition event in Trenton.
Opponents of the GOP tax overhaul argue an elimination of the SALT deduction amounts to a “double tax” because residents would have to pay federal income taxes on earnings that are already taxed by their state and local governments.
“I’m not a constitutional lawyer. I’m not smart enough to know whether that’s accurate or not,” Murphy said. “But we’re also already engaging not just our team within our operation, but with legal scholars around the state and, if we need to, around this country to figure out what it means to tear up the floor boards and exhaust all options.”
He said the GOP tax bill’s movement through Congress without hearings could also give New Jersey legal opportunities. “It’s been put together under the cover of night, with no hearings, with 500 – somebody told me they’re adding 500 pages of technical adjustments,” Murphy said. “That gives me the modest hope, and I hope expectation, that there are flaws in this bill. That there are openings in this bill for legal or other action.”
New Jerseyans could pay $137 million more in federal taxes over a decade if the House bill becomes law, according to a report from the Institute on Taxation and Economic Policy. Murphy said the state would get “screwed” if the Senate bill became law.
“My temperature has gone up on Washington,” Murphy said. “This is a complete and utter outrage. And I don’t know how else to say it. We ain’t gonna stand for it.”
The Senate has begun debate on the tax bill and it could be voted on as soon as Thursday night or Friday.