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Speaker 1: Welcome to the Bloomberg Law Podcast. I'm June Grosso. Every

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Speaker 1: day we bring you insight and analysis into the most

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Speaker 1: important legal news of the day. You can find more

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Speaker 1: episodes of the Bloomberg Law Podcast on Apple Podcasts, SoundCloud

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Speaker 1: and on Bloomberg dot com slash podcasts. Well, the ink

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Speaker 1: is barely dry on the Republican tax bill, but some

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Speaker 1: states are already gaming the overhaul with plans for workarounds

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Speaker 1: or lawsuits. New York and California are leading the efforts,

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Speaker 1: and state governments will also try to shield their residents

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Speaker 1: from tax heights. They'll suffer from a sharp reduction in

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Speaker 1: state and local deductions by changing their tax codes. My

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Speaker 1: guest is Michael No, professor at the University of Pennsylvania

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Speaker 1: Law School. Michael first explained the new cap on salt

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Speaker 1: deductions and the states it will hit most well. The

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Speaker 1: cap is ten thousand dollars a year maximum deduction for

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Speaker 1: individuals to take for state and local taxes, which will

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Speaker 1: include income taxes, sales taxes, and property taxes. And not surprisingly,

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Speaker 1: the states likely to be hit hardest are those with

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Speaker 1: high tax rates, high property prices, and wealthy people, so

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Speaker 1: mostly along the East Coast and the West coast of

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Speaker 1: the United States. In California, legislators planned to introduce laws

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Speaker 1: intended to sidestep the new federal cap. What's the work

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Speaker 1: around they're going to try to put in place? Um, Well,

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Speaker 1: a number of states have looked at a number of alternatives.

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Speaker 1: One alternative is to provide a credit against the state

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Speaker 1: income tax for certain forms of charitable contributions basically charitable

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Speaker 1: contributions to the state or to various state programs. That

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Speaker 1: seems to be the one that's getting the most attention.

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Speaker 1: Another suggestion has been to replace the current state income

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Speaker 1: tax with a wage tax that's imposed on the employer,

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Speaker 1: because employer, state and local taxes will still be deductible.

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Speaker 1: So in New York, Governor Cuomo is considering the plan

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Speaker 1: that you just mentioned of shifting the state's revenue collections

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Speaker 1: from income to payroll taxes. How hard would that be

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Speaker 1: to design and implement? Oh, that is going to be

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Speaker 1: difficult to make work, um assuming even that it would

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Speaker 1: pass muster with the authorities, that is, with the federal

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Speaker 1: tax authorities. The problem is we've got in states such

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Speaker 1: as New York, not a flat tax, but a tax

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Speaker 1: that is progressive runs a bunch of different rates, long

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Speaker 1: term contracts for many employees. Uh, and those employees who

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Speaker 1: are not necessarily going to buy oh, just because the

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Speaker 1: state has changed the way for collecting taxes that my

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Speaker 1: salaries should therefore drop um. And so there those practical problems,

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Speaker 1: and it's still not clear. Um. Well, for New York

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Speaker 1: would would work constitutionally, but but they're real practical implementation problems. Well,

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Speaker 1: what kind of the federal government? In fact? Today on

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Speaker 1: Bloomberg TV, Chump's top economic advisor Gary Cohen said the

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Speaker 1: federal government would have to evaluate these state plans because

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Speaker 1: it would mean that a lot of revenue would not

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Speaker 1: be getting to the government to fund the corporate tax

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Speaker 1: cuts at the center of the overhaul plan. What could

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Speaker 1: the federal government do if New York or California institutes this, Well, um,

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Speaker 1: let's start with the charitable approach, with the idea of

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Speaker 1: taking charitable deductions. In that case, what happens is the

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Speaker 1: I R S and the Treasury could take the position

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Speaker 1: that those contributions aren't really charitable contributions because you're getting

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Speaker 1: something in exchange, you're getting a reduction in your tax

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Speaker 1: and therefore you wouldn't be and shouldn't be entitled to

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Speaker 1: the charitable deduction. There's a little bit of authority out there,

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Speaker 1: a few small matters which suggests otherwise, but nothing wide scale,

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Speaker 1: and it would be fairly easy for Treasury to reverse

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Speaker 1: uh any authority in those cases. If we talk about

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Speaker 1: a wage tax, it's a little tougher because that is

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Speaker 1: much more well established that the wage tax is going

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Speaker 1: to be deductible by the employer. That likely would take

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Speaker 1: stronger action. U. I'm not sure if it could be

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Speaker 1: done solely by the Treasury or if it would require

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Speaker 1: congressional action as well. So what you're talking about then

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Speaker 1: is possibly a long haul before this gets settled, and

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Speaker 1: before even if the federal government succeeds, before the states

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Speaker 1: end up having to turn that money over. Um. Well,

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Speaker 1: wouldn't be the states that have to turn the money over.

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Speaker 1: It would be the individual taxpayers who have to turn

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Speaker 1: the money over, And that is in fact who the

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Speaker 1: I R s would likely have to go after. There,

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Speaker 1: the individual taxpayers are the money because for example, the

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Speaker 1: charitable deductions aren't real charitable deductions. But wouldn't it would

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Speaker 1: take a long time, wouldn't It will be be very

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Speaker 1: messy and a lot of UH lawsuits involved. Well, I

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Speaker 1: think the treasuring the I R s who have some

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Speaker 1: time because it's only started a couple of days ago.

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Speaker 1: The new law only applies to and beyond UH, they're

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Speaker 1: likely to get out in front and start at least

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Speaker 1: providing guidance. But you are ultimately right that those matters

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Speaker 1: still will go to the courts, but individuals will be

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Speaker 1: the ones who would have to step up, uh, not

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Speaker 1: the taxing, not the states. And you know, politically it

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Speaker 1: could be pretty ugly. It sounds like it is going

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Speaker 1: to be a while before it works itself out. We'll

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Speaker 1: see what happens in California and New York, which you're

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Speaker 1: leading it. Thank you, Michael for being here. That's Professor

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Speaker 1: Michael Nol of the University of Pennsylvania Law School. What's

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Speaker 1: one of the best ways to get the public to

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Speaker 1: want to read a book? Try to stop its publication

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Speaker 1: and threatened to sue over it. President Trump has done

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Speaker 1: just that and trying to still up the publication of

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Speaker 1: the new expose about him, Fire and Fury inside the

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Speaker 1: Trump White House by journalist Michael Wolf. The book shot

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Speaker 1: up to number one on Amazon's best seller list, and

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Speaker 1: the publisher moved up the publication to today. Wolf tweeted

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Speaker 1: yesterday you can buy it and read it tomorrow. Thank you.

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Speaker 1: Mr President. Wolfe defended his book on the NBC News

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Speaker 1: Today Show. My credibility is being questioned by a man

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Speaker 1: who has less credibility than perhaps anyone who has ever

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Speaker 1: walked on earth at this point, My guest is Peter Henning,

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Speaker 1: professor at Wayne State University Law School. Peter Trump has

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Speaker 1: repeatedly threatened lawsuits and very often has not followed through.

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Speaker 1: But let's talk about if he did sue. The extremely

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Speaker 1: high hurdle that Trump would face if he filed a

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Speaker 1: defamation suit because he and his family are clearly public figures. Well,

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Speaker 1: certainly he is, and um, you know whether his youngest

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Speaker 1: son would be as a different issue, but it's the

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Speaker 1: standard here comes from a case in the early nineteen

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Speaker 1: sixties New York Times versus Sullivan where for public figures. Uh,

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Speaker 1: what he would have to show. What the President would

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Speaker 1: have to show is that the any falsity um in

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Speaker 1: the book was either done knowingly or at least with

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Speaker 1: reckless disregard for the truth. And that is a very

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Speaker 1: high standard because do people make mistakes. Absolutely, and if

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Speaker 1: you are talking about opinions or shading, the placement of

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Speaker 1: anecdotes or how someone emphasized something, uh that that's not

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Speaker 1: going to show a reckless disregard for the truth. So

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Speaker 1: to win a defamation case, um, when you're a public

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Speaker 1: figure yourself, it's very difficult and frankly may not even

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Speaker 1: be worth the candle. Trump's lawyers are also attempting to

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Speaker 1: hold Steve back into a non disclosure agreement they said

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Speaker 1: he signed with Trump and his presidential campaign that was

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Speaker 1: unusually broad. What problems do they face here, Well, certainly

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Speaker 1: that anything that Bannon said, um while he was affiliated

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Speaker 1: with the campaign would come under that nondisclosure agreement. The

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Speaker 1: question would be, uh, something that broad in the non

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Speaker 1: disparagement clause. Whether that could even be enforced in court

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Speaker 1: is an open question. But once Bannon transitioned over to

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Speaker 1: working in the White House, he was no longer working

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Speaker 1: for Donald Trump, even though Donald Trump in fact did,

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Speaker 1: as the president says, fire him. But Bannon worked for

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Speaker 1: the office of the President of the United States, and

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Speaker 1: that's not just Donald Trump. So whatever that agreement was,

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Speaker 1: the confidentiality, non disparagement that applied to the campaign period,

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Speaker 1: not when Bannon was working for the United State's government.

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Speaker 1: He was a public employee like any other public employee,

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Speaker 1: and he can disclose information as long as it's not

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Speaker 1: top secret or otherwise confidential. Uh, he is allowed to

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Speaker 1: disclose that and discuss it. That's that's what the First

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Speaker 1: Amendment is there for. And so would they win on

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Speaker 1: this fight. Maybe they would, but the cost would be

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Speaker 1: significant because you're talking about more litigation. Let's put aside

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Speaker 1: for a moment the reasons any lawsuit might fail and

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Speaker 1: talk about the practicalities of a lawsuit. It would open

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Speaker 1: Trump up to pre trial discovery, the request for documents

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Speaker 1: or depositions. Talk about how extensive that could be. Well, certainly,

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Speaker 1: if this filing is in state court, where that's generally

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Speaker 1: where defamation, libel, and slander cases are brought, there's not

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Speaker 1: a federal defamation law. Um, if it's brought in state court,

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Speaker 1: then you're talking about if it will New York or Washington,

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Speaker 1: d c. Whatever the applicable rules are in The discovery

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Speaker 1: rules in civil cases are really quite broad that you

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Speaker 1: just need to show a possible connection between what is

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Speaker 1: being sought and evidence that would be useful at trial.

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Speaker 1: And certainly the president would be deposed. Others who might

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Speaker 1: have made comments in the book could be deposed, people

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Speaker 1: who were present for conversation. So you're really talking about

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Speaker 1: opening up a box that I'm not sure the president

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Speaker 1: would want to have opened. And of course, for a

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Speaker 1: defamation case in the United States, certainly truth is a defense.

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Speaker 1: And so if you are claiming that there is a

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Speaker 1: false statement here or you're gonna have to prove you

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Speaker 1: the plaintiff are going to have to prove that it

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Speaker 1: was a false statement. Trump is also facing himself a

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Speaker 1: defamation lawsuit brought by a former contender on the Apprentice

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Speaker 1: TV show. So what would his suing ban in expose

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Speaker 1: him to in that suit. Well, one of his arguments

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Speaker 1: in that lawsuit, which was filed in state court in

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Speaker 1: New York by a former Apprentice contestant, is that the

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Speaker 1: president can't be sued um when uh he is president

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Speaker 1: of the United States. That the case at a minimum

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Speaker 1: has to be held over until after his term is concluded,

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Speaker 1: whether that before eight years. To them turn around and

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Speaker 1: sue in state court essentially would be saying, uh, you

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Speaker 1: can't sue me. But I can sue you, and judges

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Speaker 1: don't really care for having a litigant speak out of

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Speaker 1: both sides of his or her mouth, So it would

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Speaker 1: make it more difficult to get that apprentice lawsuit dismissed.

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Speaker 1: And there any number of challenges to getting that lawsuit

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Speaker 1: dismissed anyway, as we know from the Clinton period, Uh,

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Speaker 1: the Supreme Court said that at least in federal court,

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Speaker 1: a sitting president can be sued. Uh. So whether Mr

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Speaker 1: Trump wants to go down that road, it presents a

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Speaker 1: number of difficulties for him. And Peter, you mentioned the

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Speaker 1: First Amendment. Let's just talk a little bit about the

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Speaker 1: core values of the First Amendment that include the political

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Speaker 1: speech that it seeks to protect. Oh, certainly, and uh,

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Speaker 1: this book, Mr Wolf's book is about the president now

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Speaker 1: and contains a number of uh, personal anecdotes. It's not

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Speaker 1: so much a policy book, but that would probably fall

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Speaker 1: more into the tell all or tabloid uh category. But still,

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Speaker 1: the life and decision making of a president are matters

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Speaker 1: of public interest, and so it could reasonably be described

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Speaker 1: as political speech, which, as the Supreme Court has said,

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Speaker 1: gets the highest level of protection. And of course, also

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Speaker 1: we're talking about someone a journal in the media, publishing

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Speaker 1: books is like publishing newspapers or being on Bloomberg Radio.

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Speaker 1: That this is a highly protected area. And so there

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Speaker 1: was talk of trying to stop the publication of the book,

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Speaker 1: and that that's not going to go anywhere. Um, no

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Speaker 1: judge is going to stop a book from being published.

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Speaker 1: If the president doesn't like it, Peter, go into court.

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Speaker 1: I have to stop you there, but and you can

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Speaker 1: go back to reading the book now. That's Professor Peter

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Speaker 1: Hending of Wayne State University Law School. Thanks for listening

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Speaker 1: to the Bloomberg Law Podcast. You can subscribe and listen

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Speaker 1: to the show on Apple Podcasts, SoundCloud, and on Bloomberg

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Speaker 1: dot com slash podcast. I'm June Brosso. This is Bloomberg