Suing federal government is not the best way for state tax relief: Editorial

Given the sheer complexity of the matter, it would be flat-out wrong to say all New Yorkers will be hurt by the recently passed federal tax bill. Millions will be helped, at least initially. But, on balance, the state is bound to be a loser, especially when you consider that — even before this massive deal was approved — New York has been giving Washington far more in taxes than it has been receiving back in funds and services.

In fact, state Comptroller Thomas DiNapoli has reported that New York is sending nearly $41 billion more to Washington than it is receiving back in federal spending — and that number has been growing.

Put another way, for every dollar New York taxpayers are sending to D.C., annually, they received back just 84 cents. Changes to the federal tax law will make that situation worse.

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Specifically, the alterations to the tax code limit state and local deductions, including property taxes. This will hurt not only high-income earners but people living in high property tax areas, such as New York. As a result, the governors of New York, Connecticut and New Jersey are planning to sue the federal government over the changes.

"There is a very strong argument that the bill is a fundamental violation of states’ rights and repugnant to the very concept of federalism that formed this nation," Gov. Andrew Cuomo said in a conference call with Connecticut Gov. Dannel Malloy and New Jersey Gov. Phil Murphy.

Perhaps the governors are right, and they will get their day in court. But neither Cuomo nor the people he represents should count on winning such a lawsuit. Cuomo also is contemplating changes in state law, which is likely a more realistic way to address this burden. The governor and New York lawmakers are going to have get deeply involved in figuring out ways to hold taxpayers harmless from certain federal changes. Ideas include moving from an income tax to a payroll tax, creating a charitable contribution program so homeowners can still fully deduct their state and local taxes and/or decoupling the state’s tax rates from the new federal ones.

But, surely, it shouldn’t be lost on state officials that, while President Donald Trump and Congress didn’t get this precisely right, tax reform is needed, and some of the changes will clearly benefit most New Yorkers. The governor needs to account for the tax breaks most New Yorkers are getting under the changes, such as lower income-tax rates and  higher child deductions.

Along those lines, the state has plenty of its own work to do. New York’s taxing structure is far too convoluted and complicated. For instance, rather than cutting taxes across the board, the state over time has implemented a series of piecemeal programs, including offering rebate checks that haven’t always proved effective. These programs can be confusing, leading people to apply for ones they are not eligible for. State lawmakers like to rely on rebate checks because they believe people are more likely to recognize the break that way as opposed to if the cuts were reflected in their regular school-tax bill. But the rebate mailing system has proven wildly inconsistent over the years, with some homeowners not receiving the checks in time to pay their school bills, while others got the checks with wrong amounts.

To lower the financial burden on New Yorkers, the state would be better off streamlining the tax structure and also reducing the considerable mandate burdens it places on localities and school districts.

In all likelihood, a lawsuit against the new federal tax law will end up as a bust or merely bluster. But the state does have the ability to make meaningful tax changes on its own and should get to it.

Opinion Engagement Editor John Penney wrote this editorial on behalf of The Poughkeepsie Journal Editorial Board. Email him at jpenney@gannett.com; follow him on Twitter at @johnpenneynews