Speaker 1: You're listening to Bloomberg Law with June Grasso from Bloomberg Radio.
Speaker 1: The U. S. Supreme Court is asking for the Biden
Speaker 1: administration's views on a state against state class over billions
Speaker 1: of dollars in income taxes paid by people who are
Speaker 1: working from home during the COVID nineteen pandemic. New Hampshire
Speaker 1: is seeking to sue Massachusetts directly at the High Court
Speaker 1: to challenge that state's practice of taxing nonresidents who used
Speaker 1: to work in Massachusetts but now do their jobs from home.
Speaker 1: Joining me is Michael Gratz, professor at Columbia Law School.
Speaker 1: It's the due process clause at the commerce clause. What's
Speaker 1: the legal issue here? Well, there were really two legal issues.
Speaker 1: I mean, one is it really has to do with
Speaker 1: whether the Court will take the case. That is, the
Speaker 1: Article three of the Constitution creates an automatic hearing in
Speaker 1: the Supreme Court to resolve a controversy between two or
Speaker 1: more states, and if this is in fact that then
Speaker 1: the Court would have to take the case, although I
Speaker 1: don't believe that it falls within Article three of the Constitution,
Speaker 1: So I think the Court has discretions to whether we'll
Speaker 1: hear this case. If it does. Here the case, the
Speaker 1: issue is really a commerce cause issue and a burden
Speaker 1: on interstate travel or interstate commerce, and usually they come
Speaker 1: up as commerce clause cases. You can find other places
Speaker 1: in the Constitution that are this case from, and nobody's
Speaker 1: yet really briefed it, so you know, it may be
Speaker 1: a privilege and immunities case under the fourteenth Amendment, but
Speaker 1: I think it's it's really a converse clause case. That's
Speaker 1: likely the way the Court will hear it. Let's talk
Speaker 1: first about the original jurisdiction of the Supreme Court. So
Speaker 1: just explain what it means that the Supreme Court has
Speaker 1: original jurisdiction cases between states. Well, the classic example, going
Speaker 1: back a long way, would be if one state it
Speaker 1: says that along the border, this piece of land or
Speaker 1: this much of a river is within that state's boundaries,
Speaker 1: and another state says, oh no, it's our land or river.
Speaker 1: Then that would be a classic case where the Supreme
Speaker 1: Court would have to resolve with its fute between the states.
Speaker 1: But here what we're really talking about is a problem
Speaker 1: of taxation, which is claimed by individuals that one state
Speaker 1: is over taxing or even though the states themselves after
Speaker 1: the case is claiming that it's going to lose a
Speaker 1: lot of revenue as a result of this because it
Speaker 1: gives a credit for the Massachusetts taxes, or in the
Speaker 1: case of the tri state area, we would be talking
Speaker 1: about New Jersey and Connecticut complaining that they're giving credits
Speaker 1: for New York taxes and New York is overreaching. But
Speaker 1: whether that's really within the original jurisdiction under Article three,
Speaker 1: I think there's some doubt about that. And so under
Speaker 1: Article three, if it were a dispute between the states,
Speaker 1: and obviously New Hamphire's claiming it's dispute between the states,
Speaker 1: the court would have to hear the case, but the
Speaker 1: court gets to decide it's interpretation of Article three. And
Speaker 1: if the court doesn't want to take the case, I
Speaker 1: think it has a basis for saying that this is
Speaker 1: not an Article three case, but instead it's a dispute
Speaker 1: between taxpayers and two states and who should be collecting
Speaker 1: their taxes, and that's the case that the taxpayers need
Speaker 1: to bring in it, and it's a case that the
Speaker 1: court may or may not want to hear, or the
Speaker 1: court may decide that because of the revenue units at state,
Speaker 1: New Hampshire has a right to be heard on the
Speaker 1: case and maybe a party, although I think that may
Speaker 1: be a stretch, But it's not an original jurisdiction case
Speaker 1: under under Article three. So the first question is will
Speaker 1: this case get to the court, Will the Court take
Speaker 1: this case? And that I think is a matter of for
Speaker 1: for some doubt, the Court refused the case where Texas
Speaker 1: was suing Pennsylvania over the elections. How difficult is it
Speaker 1: to get the court to get involved in states disputes
Speaker 1: right away in an original jurisdiction setting. Well, the Court
Speaker 1: doesn't like to be told that it must take a case,
Speaker 1: and so it often asks whether this is really a
Speaker 1: case of original jurisdiction, and it wants to limit those
Speaker 1: kinds of cases. The lawsuit that was filed by the
Speaker 1: Texas Attorney General about voting in Pennsylvania really presents, I
Speaker 1: think the clearest example of the kind of case that
Speaker 1: was the Preme Court certainly doesn't want to take and
Speaker 1: absolutely doesn't want to say they have to take under
Speaker 1: Article three. So I mean that's a good example of
Speaker 1: a case where the Supreme Court really didn't want to
Speaker 1: hear it, and just because it was by Texas against Pennsylvania,
Speaker 1: doesn't mean that it's a genuine conflict between the states.
Speaker 1: Was just claiming the Pennsylvania got its voting system wrong,
Speaker 1: And here New Hampshire is just claiming that Massachusetts is
Speaker 1: its tax system wrong, it is being unconstitutional and its
Speaker 1: exercise of its tax empower. So I think this is
Speaker 1: a case that the court can duck if it wants to.
Speaker 1: It could also say it's not original jurisdiction case, but
Speaker 1: we're going to hear it. We're going to grant the
Speaker 1: sarciary and take the case in this case because New Hampshire,
Speaker 1: the court would say, is a proper party to such
Speaker 1: a suit, and it makes sense to go ahead and
Speaker 1: hear it sooner or rather than later. A taxpayer to
Speaker 1: bring the case to the court, which is the normal
Speaker 1: in which these state tax cases get to the court.
Speaker 1: But this is not a court I think that's going
Speaker 1: to be anxious to get to a decision earlier rather
Speaker 1: than later, or create a precedent where a state can
Speaker 1: be a party in the lawsuit that really involves a
Speaker 1: dispute between an individual and the two states that are
Speaker 1: imposing taxes on him her. So let's go back to
Speaker 1: you said a commerce clause argument. What is New Hampshire's
Speaker 1: basic argument. Why is it suing Massachusetts. Well, it's basically
Speaker 1: suing on the ground that Massachusetts is imposing tax on
Speaker 1: New Hampshire residents who are not working in Massachusetts. They're
Speaker 1: doing their their work in New Hampshire. Now they may
Speaker 1: be doing it for an employer who's in Massachusetts, in
Speaker 1: which case New Hampshire is likely to lose that case
Speaker 1: based on prior president But but that's the claim. The
Speaker 1: claim is that New Hampshire's residents are being discriminated against
Speaker 1: because Massachusetts is overreaching its tax claim. Well that's what
Speaker 1: sort of hit me is because it seems from reading this,
Speaker 1: these are employees who were working in Massachusetts and then
Speaker 1: because of COVID, you know, they started working from their
Speaker 1: homes in New Hampshire. So if they're working for a
Speaker 1: Massachusetts company, you think that Massachusetts has a better case.
Speaker 1: I think Massachusetts has a pretty strong case. I mean,
Speaker 1: those those of us who live in the Tri state
Speaker 1: area know that New York certainly has for a long
Speaker 1: time taxed residents from New Jersey or Connecticut on the
Speaker 1: income they earned on New York employers, and New York
Speaker 1: certainly will come into this case on the side of Massachusetts,
Speaker 1: if if, if the court takes the case. Now, Massachusetts
Speaker 1: made this argument basically, this is an emergency measure. Let's
Speaker 1: just do this until we see what shakes out with COVID.
Speaker 1: Is that a good argument, Well, it depends on whose
Speaker 1: side you're on. Massachusetts is obviously concerned that at a
Speaker 1: time when the economy is struggling, people are able now
Speaker 1: to work for Massachusetts employers outside of Massachusetts of New Hampshire,
Speaker 1: a lot of people live across the border in their
Speaker 1: hand ture to avoid income taxes on on their other
Speaker 1: income and other taxes, and they're hipers. Notoriously a light
Speaker 1: taxation state, and Massachusetts back in the old days, used
Speaker 1: to be called tax a Chusets. They have a reputation
Speaker 1: of the higher and they are a higher tax state.
Speaker 1: So Massachusetts is concerned that all these people are now
Speaker 1: going to claim that they're not working in Massachusts are
Speaker 1: coming to Massachusetts and therefore Massachusts can't tax them. And
Speaker 1: you know, the usual rule is that the states have
Speaker 1: is that you're treated as being taxable as a statutory
Speaker 1: resident of the state that you're there more than a
Speaker 1: hundred eighty three days more than half a year. And
Speaker 1: here people who may have been routinely there in Massachusetts
Speaker 1: more than half the year are finding themselves spending little
Speaker 1: or no time in Massachusetts because they've left and are
Speaker 1: not coming back until the COVID emergency is behind us.
Speaker 1: It's just some ways in the future. And massachusettsbviously concerned
Speaker 1: that they may lose a lot of revenue the two
Speaker 1: or three years that that's going to take to get
Speaker 1: people back to work. And of course the other problem
Speaker 1: is that that given the fact that people like working
Speaker 1: at home, at least the ones who don't have young
Speaker 1: children are not in school, you know, may mean that
Speaker 1: more and more companies find it profitable to have people
Speaker 1: work from home rather than leasing or owning office rights
Speaker 1: in Massachusetts. So this pandemic is a long term threat
Speaker 1: to longstanding work relationships. Can a chord take into account?
Speaker 1: I mean, let's say, for example, New Jersey estimates it
Speaker 1: will credit as much as one point two billion dollars
Speaker 1: to its residents for income taxes paid to New York
Speaker 1: in the twelve months starting in March. Can the court
Speaker 1: take into account in any way the billions of dollars
Speaker 1: that some of these states will be losing or is
Speaker 1: that peripheral. Well, I don't know. I mean, I haven't
Speaker 1: looked at the numbers, and so I don't know whether
Speaker 1: New Jersey is telling if that's the total credit. I
Speaker 1: wonder what they've been crediting before the pandemic. There are
Speaker 1: a lot of New Jersey residents who are working in
Speaker 1: New York, as we all know well, and New Jersey
Speaker 1: has been crediting New York taxes on salaries that people
Speaker 1: are in New York for a very long time. So
Speaker 1: I don't know whether this is an additional at one
Speaker 1: point two billion, or whether it's what they've been where
Speaker 1: it includes what they've been doing all along. But but
Speaker 1: I'm sure the numbers are large. Um, But I think
Speaker 1: that you know, at least in the Tri state area
Speaker 1: and the Massachusetts New Hampshire border, the area surrounding the
Speaker 1: District of Columbia, it's quite common for people to work
Speaker 1: in one jurisdiction and live and another jurisdiction. And so
Speaker 1: that's not a new problem. And there are some Supreme
Speaker 1: Court jurisprudence on that, and the basic rule is that
Speaker 1: you can't treat the out of state or worse than
Speaker 1: you treat the in state or the doctor is that
Speaker 1: the state can't be internally inconsistent between in state and
Speaker 1: out in state. President, But I would say that New
Speaker 1: York would say, what, we're taxing our in state residents
Speaker 1: on your salaries, so we're not discriminating against out of states.
Speaker 1: So ignoring the jurisdiction question and just looking at the
Speaker 1: substantive issue, which state has the better argument, I'd rather
Speaker 1: answer the question which state is more likely to win
Speaker 1: um if the court takes the case, and I think
Speaker 1: Massachusetts is more likely to win just based on the
Speaker 1: precedence of the Supreme Court in allowing states a lot
Speaker 1: of flexibility about taxing income that the state regards as
Speaker 1: having been earned in their state because the employers in
Speaker 1: that state. So I think it's a long shot for
Speaker 1: the residents of New Hampshire to win this case. But
Speaker 1: it's even it's difficult to think that a resident of
Speaker 1: Hampshire is going to have to wherewithal to take a
Speaker 1: case like this to the federal courts and bring it
Speaker 1: up through the district core. It's a colored court can
Speaker 1: get to the Supreme Court, even if they thought the
Speaker 1: Supreme Court would take it. It's a very expensive litigation proposition,
Speaker 1: so this may be the only way it's going to
Speaker 1: get to the Supreme Court. And if the Supreme Court
Speaker 1: doesn't decide this, you know, then everybody's going to be
Speaker 1: in a bit of a mess. Congress is not going
Speaker 1: to do it. Congress can obviously step in and do
Speaker 1: this not to the commerce causing power, but they're not
Speaker 1: going to enter into this. And all you have to
Speaker 1: do is think about the political fight that there would
Speaker 1: be between the states where people are residing in the
Speaker 1: states where they're working. Why did the Supreme Court do
Speaker 1: you think ask the Solicitor General for her opinion. Well,
Speaker 1: I think what they'd like to hear from the Solicitor
Speaker 1: General is that this is not an Article three case
Speaker 1: of original jurisdiction which the Court must hear um and
Speaker 1: that would then bolster decision not to hear the case.
Speaker 1: And the Solicitor General's office historically is thought to be
Speaker 1: thought for and take into account institutional kinds of concerns,
Speaker 1: and so I think they're looking for an opinion from
Speaker 1: this of Ocester General and brief from the Sycester General
Speaker 1: saying this is not a case of a rich mo jorisdiction.
Speaker 1: Under Article three, you get to choose it or not conceivable.
Speaker 1: But let's listener. General would also argue that case needs
Speaker 1: to be brought by the taxpayer, not by the state.
Speaker 1: Thanks Michael, that's Michael Grat's of Columbia Law School. Leticia
Speaker 1: James is the first woman in the first black person
Speaker 1: elected to be the Attorney General of New York State.
Speaker 1: As Attorney General, James has filed or joined lawsuits against
Speaker 1: the Trump administration on issues such as immigrants rights and
Speaker 1: housing discrimination. She's also investigating the former president and his
Speaker 1: real estate business, in addition to leading a group of
Speaker 1: states in an anti trust suit against Facebook. Joining me
Speaker 1: is Eric Larson, Bloomberg legal reporter, who recently spoke to
Speaker 1: James about her tenure as a g Leticia James and
Speaker 1: the Attorney General of California, vir Be Sarah, are the
Speaker 1: two ages who have been in the lead on lawsuits
Speaker 1: against the Trump administration. Is that because they represent the
Speaker 1: biggest blue states or is it because they're aggressive? Well,
Speaker 1: I think it's a combination of both. Really, I mean
Speaker 1: the the as the Attorney General James says it, California
Speaker 1: and New York a kind of like the book ends
Speaker 1: of what she described as the resistance that the Blue
Speaker 1: state ages had against the Trump administration. I mean, these
Speaker 1: are two states with huge populations and obviously a lot
Speaker 1: of lawyers. In New York, for example, she has a
Speaker 1: team of seven hundred lawyers and over a thousand additional staff. Um,
Speaker 1: so they are working on there. They have the resources
Speaker 1: to be able to put together these huge lawsuits that
Speaker 1: a lot of other states join, or they do on
Speaker 1: their own, or they do in cooperation. So it really
Speaker 1: isn't a matter of those resources. Her lawsuits against Trump
Speaker 1: as president, where do they stand? Well? Those lawsuits of
Speaker 1: mostly been resolved, and she says that she filed I
Speaker 1: think about sixty five or so lawsuits against the Trump
Speaker 1: administration California. I remember they filed over a hundred and
Speaker 1: and Tis James says that she succeeded in about eighty
Speaker 1: five percent of those cases. So really, most of those
Speaker 1: cases that we've all been covering in the past several
Speaker 1: years are for the most part a sort of done,
Speaker 1: and the few that may still remain, it's it's likely
Speaker 1: that the Biden administration is going to take a different
Speaker 1: task on those but the big ones we already saw
Speaker 1: with like the the U. S. Census and the question
Speaker 1: about citizenship, that sort of thing. Um, those those who
Speaker 1: are already resolved. Much attention has been given to her
Speaker 1: investigation against Trump the Trump organization. First of all, describe
Speaker 1: what that investigation is concerned with. So the New York
Speaker 1: Attorney General is investigating the Trump organizations based in New York. UM.
Speaker 1: She opened the investigation after Trump's former lawyer, victor of
Speaker 1: Michael Cohen, gave the testimony in Congress outlining what he
Speaker 1: described as fraudulent conduct involving the valuation of assets that
Speaker 1: essentially gave financial benefits through taxes or bank loans to
Speaker 1: UH to the company. So she opened the investigation in
Speaker 1: two thousand nineteen in response to those remarks. Something she couldn't,
Speaker 1: you know, really ignore um and that that investigation was
Speaker 1: going along very quietly but wasn't really a public investigation,
Speaker 1: the civil investigation, and it sort of blew up into
Speaker 1: the public again because she had to file lawsuits to
Speaker 1: enforce some subpoenas in that case, which she won. But
Speaker 1: at any rate, the investigation is still ongoing. It's it's
Speaker 1: still at a fairly early stage. Is there any hint
Speaker 1: that she might let up on it because he's no
Speaker 1: longer president? Oh? Absolutely not. When I spoke with her,
Speaker 1: she said she fully intends to uh follow this investigation
Speaker 1: where where it goes. Um, you know there. Of course,
Speaker 1: she acknowledges that that President Biden and other some other
Speaker 1: Democrats have said that we want to move ahead and
Speaker 1: sort of have this unity and and let some some
Speaker 1: things go. That's not how she sees it in in
Speaker 1: any way. Um, And I think that if there is
Speaker 1: a case when their investigation is done, I don't think
Speaker 1: she's gonna have any problem bringing in Let's talk about
Speaker 1: the latest suit that drew a lot of attention, the
Speaker 1: n r A suit. What's that about? So when Si
Speaker 1: James was running for a g she had was very
Speaker 1: critical of the n r A. At one point she
Speaker 1: even called it a terrorist organization. Uh, so it wasn't
Speaker 1: too surprising that she has really looked into the organization.
Speaker 1: Uh the n r A of course, playing that all
Speaker 1: this attention is politically motivated, but her lawsuit really does
Speaker 1: stem from some internal dispute that blew up at the
Speaker 1: n r A came out into the public about allegations
Speaker 1: of financial shenanigans. So was their own internal uh fighting
Speaker 1: that sort of resulted in this lawsuit rather than something
Speaker 1: political on Tis James's part. That's the way she described it. So, Um, yes,
Speaker 1: they clearly are are very much opposed to they have
Speaker 1: very different views about guns. But the way that Tish
Speaker 1: Strange describes it, this is a purely following the law case. Um,
Speaker 1: it's a New York based charity organization that is suspected
Speaker 1: of violating charity laws by enriching pop executive. So she
Speaker 1: just says she's following the law and that it was
Speaker 1: the organization's own internal fighting that brought it to her attention.
Speaker 1: Has she gotten any blowback from Second Amendment activists about
Speaker 1: taking away their guns or anything like that when she
Speaker 1: filed this, Well, that's certainly what the n r A says,
Speaker 1: But she described the lawsuit is being filed on behalf
Speaker 1: of n r A members, people who have donated money
Speaker 1: to protect the Second Amendment, only to allege to see
Speaker 1: millions of those dollars end up going to luxury items
Speaker 1: and expenses for our top n r A executives, like
Speaker 1: vacations and yachts and things like this, trips all over
Speaker 1: the place for families and and whatnot. So Fish James
Speaker 1: has very different views about guns and these n r
Speaker 1: A members, but she says she's filed this lawsuit to
Speaker 1: protect them and to enforce New York laws protecting charities
Speaker 1: and donations. Eric or the Google and Facebook cases antitrust lawsuits. Yeah,
Speaker 1: you know, she's leading the Facebook UM lawsuits. It's been
Speaker 1: filed where she's one of many other states who has
Speaker 1: joined uh TO to Google. So they're two separate, two
Speaker 1: separate cases. UM. In the Facebook case that she's been leading, UM,
Speaker 1: it accuses the social media company of running a you know,
Speaker 1: monopolistic behavior by snapping up what it viewed as potential
Speaker 1: rivals like Instagram and what's that back when they were
Speaker 1: a lot smaller, you know, throwing huge amounts of money
Speaker 1: at them to get them on board, but basically just
Speaker 1: to stop them from becoming competitors. And the complaints alleges
Speaker 1: that that was in violation of federal anti trust law.
Speaker 1: And one of the potential things that they're speaking in
Speaker 1: the case is breaking up Facebook, which would be pretty remarkable.
Speaker 1: So that's UM a big apport she's got underway for
Speaker 1: this year. When you say they're leading the case, new
Speaker 1: York is leading the case. Does that basically mean that
Speaker 1: New York does all the work on it and the
Speaker 1: other states just joined in? Well, I think that it's
Speaker 1: it's sort of different for every UM, every multi state case.
Speaker 1: I'm not really sure exactly how they divide up the resources,
Speaker 1: but my understanding is that when when one of the
Speaker 1: states is leading it, that they are putting in most
Speaker 1: of you know, most of the the uh resources, financial
Speaker 1: and people or that sort of thing. So, UM, that's
Speaker 1: my understanding of how they break it up. What is
Speaker 1: she looking for? If Facebook came to her and said
Speaker 1: we'll do this, what would she want them to do
Speaker 1: in order to drop the suit? She would want to
Speaker 1: see the monopolists if the alleged the monopolistic behavior corrected. UM.
Speaker 1: As far as what options might be on the table
Speaker 1: for that to happen, I think it's too early to say.
Speaker 1: But that is why we we point to one of
Speaker 1: the the potential solutions that they outlined, which is to
Speaker 1: force Facebook to divest Instagram and what's that. UM. As
Speaker 1: far as what other possible measures they could come up
Speaker 1: with down the road, UH, it's pretty unclear at this point,
Speaker 1: did she handed any lawsuits she might be filing. No,
Speaker 1: that's definitely not her style. She does never ever do that.
Speaker 1: Being Attorney General is looked at as a stepping stone
Speaker 1: to being governor. Does she have those political ambitions? You know,
Speaker 1: that is something she does not talk about. When I
Speaker 1: first asked her about that, she just kind of laughed,
Speaker 1: you know, when I when I pressed her on the question,
Speaker 1: she said it's too early for her to make a
Speaker 1: decision like that. She acknowledged that the a G role
Speaker 1: in New York has been a setting stone for others
Speaker 1: to become governor, but she doesn't. She said that she
Speaker 1: doesn't know for sure if that's her path. Um. She said,
Speaker 1: for right now, she's going to be focusing on all
Speaker 1: of these lawsuits and investigations and that for now that's
Speaker 1: enough for her. Politicians don't usually want to talk about
Speaker 1: running for another office, but New York's current governor, Andrew
Speaker 1: Cuomo was the New York Attorney General before he ran
Speaker 1: for governor, and New York's former governor, Elliot Spitzer was
Speaker 1: the New York Attorney General before that, so there was
Speaker 1: a clear path from the Attorney General's office to the
Speaker 1: Governor's Office. Thanks for being on the show. Eric. That's
Speaker 1: Bloomberg Legal reporter Eric Larson. And that's it for this
Speaker 1: edition of the Bloomberg Lawn Podcast Best I'm June Grasso.
Speaker 1: Thanks so much for listening, and remember you can always
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