Cuomo Questions Constitutionality Of Tax Overhaul

The new U.S. tax code targets high-tax states and may be unconstitutional, New York Governor Andrew Cuomo said on Thursday, adding that the state is considering overhauling its own tax system in response.

The sweeping Republican tax bill signed into law by U.S. President Donald Trump on Friday introduces a $10,000 cap on deductions of state and local income and property taxes, known as SALT. It was the party's first major legislative victory since Trump took office in January.

The SALT provision will hit many taxpayers in states with high incomes, high property values and high taxes, like New York, New Jersey and California. Those states are generally Democratic leaning.

"I'm not even sure what they did is legally constitutional and that's something we're looking at now," Cuomo said in an interview with CNN.

Cuomo and California Governor Jerry Brown, both Democrats, have previously said they were exploring legal challenges to SALT deduction limits.

"You can't penalize my state because of its political affiliation. There's never been a double taxation before in the history of the nation," Cuomo added, although he suggested a legal battle in the court system may prove difficult.

Law professors have said legal challenges would likely rest on arguing that the provision interferes with the protection of states' rights under the U.S. Constitution.

Some tax attorneys said Cuomo's legal argument against the tax bill could be that it discriminates and places an unjust tax burden on states that heavily voted for Democrats in the past.

"The de facto effect of this legislation is to discriminate against blue states and particularly from (Cuomo's) perspective the state of New York," said Joseph Callahan, an attorney with the law firm Mackay, Caswell & Callahan in New York.

Cuomo said on Thursday that New York is proposing a restructuring of its tax code.

He had said last week that New York officials are assessing a redesign to the state tax code in response to the federal tax legislation.

On Friday, Cuomo said he would allow state residents to make a partial or full pre-payment on their property tax bill before Jan. 1 to benefit from the disappearing tax advantages, prompting a wave of residents to pay early.

However, the U.S. Internal Revenue Service on Wednesday advised homeowners that the pre-payment of 2018 property taxes may not be deductible.

(Reporting by Makini Brice and Stephanie Kelly, additional reporting and writing by Megan Davies; Editing by Chizu Nomiyama and Meredith Mazzilli)