New York’s Cuomo Plans Challenge Republican Tax Plan (Audio)

or lawsuits. New York and California are leading the efforts, and state governments will also try to shield their residents from tax heights. They'll suffer from a sharp reduction in state and local deductions by changing their tax codes. My guest is Michael No, professor at the University of Pennsylvania Law School. Michael first explained the new cap on salt

deductions and the states it will hit most well. The cap is ten thousand dollars a year maximum deduction for individuals to take for state and local taxes, which will include income taxes, sales taxes, and property taxes. And not surprisingly, the states likely to be hit hardest are those with high tax rates, high property prices, and wealthy people, so mostly along the East Coast and the West coast of the United States. In California, legislators planned to introduce laws

intended to sidestep the new federal cap. What's the work around they're going to try to put in place? Um, Well, a number of states have looked at a number of alternatives. One alternative is to provide a credit against the state income tax for certain forms of charitable contributions basically charitable contributions to the state or to various state programs. That seems to be the one that's getting the most attention.

Another suggestion has been to replace the current state income tax with a wage tax that's imposed on the employer, because employer, state and local taxes will still be deductible. So in New York, Governor Cuomo is considering the plan that you just mentioned of shifting the state's revenue collections from income to payroll taxes. How hard would that be

to design and implement? Oh, that is going to be difficult to make work, um assuming even that it would pass muster with the authorities, that is, with the federal tax authorities. The problem is we've got in states such as New York, not a flat tax, but a tax that is progressive runs a bunch of different rates, long term contracts for many employees. Uh, and those employees who are not necessarily going to buy oh, just because the state has changed the way for collecting taxes that my

salaries should therefore drop um. And so there those practical problems, and it's still not clear. Um. Well, for New York would would work constitutionally, but but they're real practical implementation problems. Well,

what kind of the federal government? In fact? Today on Bloomberg TV, Chump's top economic advisor Gary Cohen said the federal government would have to evaluate these state plans because it would mean that a lot of revenue would not be getting to the government to fund the corporate tax cuts at the center of the overhaul plan. What could the federal government do if New York or California institutes this, Well, um, let's start with the charitable approach, with the idea of

taking charitable deductions. In that case, what happens is the I R S and the Treasury could take the position that those contributions aren't really charitable contributions because you're getting something in exchange, you're getting a reduction in your tax and therefore you wouldn't be and shouldn't be entitled to

the charitable deduction. There's a little bit of authority out there, a few small matters which suggests otherwise, but nothing wide scale, and it would be fairly easy for Treasury to reverse uh any authority in those cases. If we talk about a wage tax, it's a little tougher because that is much more well established that the wage tax is going to be deductible by the employer. That likely would take

stronger action. U. I'm not sure if it could be done solely by the Treasury or if it would require congressional action as well. So what you're talking about then is possibly a long haul before this gets settled, and before even if the federal government succeeds, before the states end up having to turn that money over. Um. Well, wouldn't be the states that have to turn the money over. It would be the individual taxpayers who have to turn the money over, And that is in fact who the

I R s would likely have to go after. There, the individual taxpayers are the money because for example, the charitable deductions aren't real charitable deductions. But wouldn't it would take a long time, wouldn't It will be be very messy and a lot of UH lawsuits involved. Well, I think the treasuring the I R s who have some time because it's only started a couple of days ago. The new law only applies to and beyond UH, they're likely to get out in front and start at least

providing guidance. But you are ultimately right that those matters still will go to the courts, but individuals will be the ones who would have to step up, uh, not the taxing, not the states. And you know, politically it could be pretty ugly. It sounds like it is going to be a while before it works itself out. We'll see what happens in California and New York, which you're leading it. Thank you, Michael for being here. That's Professor

Michael Nol of the University of Pennsylvania Law School. What's one of the best ways to get the public to want to read a book? Try to stop its publication and threatened to sue over it. President Trump has done just that and trying to still up the publication of the new expose about him, Fire and Fury inside the Trump White House by journalist Michael Wolf. The book shot up to number one on Amazon's best seller list, and the publisher moved up the publication to today. Wolf tweeted

yesterday you can buy it and read it tomorrow. Thank you. Mr President. Wolfe defended his book on the NBC News Today Show. My credibility is being questioned by a man who has less credibility than perhaps anyone who has ever walked on earth at this point, My guest is Peter Henning, professor at Wayne State University Law School. Peter Trump has repeatedly threatened lawsuits and very often has not followed through.

But let's talk about if he did sue. The extremely high hurdle that Trump would face if he filed a defamation suit because he and his family are clearly public figures. Well, certainly he is, and um, you know whether his youngest son would be as a different issue, but it's the standard here comes from a case in the early nineteen sixties New York Times versus Sullivan where for public figures. Uh,

what he would have to show. What the President would have to show is that the any falsity um in the book was either done knowingly or at least with reckless disregard for the truth. And that is a very high standard because do people make mistakes. Absolutely, and if you are talking about opinions or shading, the placement of anecdotes or how someone emphasized something, uh that that's not

going to show a reckless disregard for the truth. So to win a defamation case, um, when you're a public figure yourself, it's very difficult and frankly may not even be worth the candle. Trump's lawyers are also attempting to hold Steve back into a non disclosure agreement they said he signed with Trump and his presidential campaign that was unusually broad. What problems do they face here, Well, certainly that anything that Bannon said, um while he was affiliated

with the campaign would come under that nondisclosure agreement. The question would be, uh, something that broad in the non disparagement clause. Whether that could even be enforced in court is an open question. But once Bannon transitioned over to working in the White House, he was no longer working for Donald Trump, even though Donald Trump in fact did, as the president says, fire him. But Bannon worked for the office of the President of the United States, and

that's not just Donald Trump. So whatever that agreement was, the confidentiality, non disparagement that applied to the campaign period, not when Bannon was working for the United State's government. He was a public employee like any other public employee, and he can disclose information as long as it's not top secret or otherwise confidential. Uh, he is allowed to disclose that and discuss it. That's that's what the First Amendment is there for. And so would they win on

this fight. Maybe they would, but the cost would be significant because you're talking about more litigation. Let's put aside for a moment the reasons any lawsuit might fail and talk about the practicalities of a lawsuit. It would open Trump up to pre trial discovery, the request for documents or depositions. Talk about how extensive that could be. Well, certainly, if this filing is in state court, where that's generally where defamation, libel, and slander cases are brought, there's not

a federal defamation law. Um, if it's brought in state court, then you're talking about if it will New York or Washington, d c. Whatever the applicable rules are in The discovery rules in civil cases are really quite broad that you just need to show a possible connection between what is being sought and evidence that would be useful at trial. And certainly the president would be deposed. Others who might have made comments in the book could be deposed, people

who were present for conversation. So you're really talking about opening up a box that I'm not sure the president would want to have opened. And of course, for a defamation case in the United States, certainly truth is a defense. And so if you are claiming that there is a false statement here or you're gonna have to prove you the plaintiff are going to have to prove that it was a false statement. Trump is also facing himself a defamation lawsuit brought by a former contender on the Apprentice

TV show. So what would his suing ban in expose him to in that suit. Well, one of his arguments in that lawsuit, which was filed in state court in New York by a former Apprentice contestant, is that the president can't be sued um when uh he is president of the United States. That the case at a minimum has to be held over until after his term is concluded, whether that before eight years. To them turn around and sue in state court essentially would be saying, uh, you

can't sue me. But I can sue you, and judges don't really care for having a litigant speak out of both sides of his or her mouth, So it would make it more difficult to get that apprentice lawsuit dismissed. And there any number of challenges to getting that lawsuit dismissed anyway, as we know from the Clinton period, Uh, the Supreme Court said that at least in federal court, a sitting president can be sued. Uh. So whether Mr Trump wants to go down that road, it presents a

number of difficulties for him. And Peter, you mentioned the First Amendment. Let's just talk a little bit about the core values of the First Amendment that include the political speech that it seeks to protect. Oh, certainly, and uh, this book, Mr Wolf's book is about the president now and contains a number of uh, personal anecdotes. It's not so much a policy book, but that would probably fall

more into the tell all or tabloid uh category. But still, the life and decision making of a president are matters of public interest, and so it could reasonably be described as political speech, which, as the Supreme Court has said, gets the highest level of protection. And of course, also we're talking about someone a journal in the media, publishing books is like publishing newspapers or being on Bloomberg Radio.

That this is a highly protected area. And so there was talk of trying to stop the publication of the book, and that that's not going to go anywhere. Um, no judge is going to stop a book from being published. If the president doesn't like it, Peter, go into court. I have to stop you there, but and you can go back to reading the book now. That's Professor Peter Hending of Wayne State University Law School. Thanks for listening

to the Bloomberg Law Podcast. You can subscribe and listen to the show on Apple Podcasts, SoundCloud, and on Bloomberg dot com slash podcast. I'm June Brosso. This is Bloomberg