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The Latest: High-tax states decry new tax rules

August 24, 2018

WASHINGTON (AP) — The Latest on the Trump administration laying down rules aimed at preventing residents in high-tax states from avoiding a new cap on widely popular state and local tax deductions. (all times local):

8:30 p.m.

The governors of New York and New Jersey, along with a state senator from California, are decrying new rules from the Trump administration that aim to block high-tax states from getting around a cap on state and local deductions.

New York Gov. Andrew Cuomo is calling the moves politically motivated and he’s threatening to sue the federal government over it. New Jersey’s Gov. Phil Murphy says the state is also weighing its options to take legal action. California State Sen. Kevin de Leon says he expects the state to sue.

All three are Democrats who say the rules are politically motivated to attack Democratic-leaning states whose residents could see substantial increases in their federal tax bills next spring because of the $10,000 cap.

Republicans have said those states should reduce their taxes instead of fighting the administration.

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5:30 p.m.

Connecticut’s governor is criticizing the Trump administration’s newly released rules to prevent people in high-tax states from skirting a cap on state and local deductions.

The state is among those where residents could see substantial increases in their federal tax bills next spring because of the $10,000 cap.

Gov. Dannel P. Malloy, a Democrat, says the Treasury Department is attempting to take away the ability of states like Connecticut to mitigate what he calls the harmful effects of the tax law passed last year by Republicans in Congress and signed by President Donald Trump.

The states of Connecticut, Maryland, New Jersey and New York already have sued the federal government over the deduction cap, asserting that it’s aimed at hurting a group of Democratic states and tramples on their constitutional budget-making authority.

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4:30 p.m.

The Trump administration has laid down rules aimed at preventing residents in high-tax states from avoiding a new cap on widely popular state and local tax deductions. The action over the new Republican tax law pits the government against high-tax, heavily Democratic states in an election-year showdown.

The Treasury Department’s newly released rules target moves by states like New York, New Jersey and California — where residents could see substantial increases in their federal tax bills next spring because of the $10,000 cap. A dozen states, most of them predominantly Democratic, have taken or are considering measures to get around the cap, mostly using deductions for charitable donations.

The new rules’ limits also apply to many other states that already have charitable funds offering tax breaks.

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