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

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<v Speaker 1>Welcome to the Bloomberg Law Podcast. I'm June Grosso. Every

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<v Speaker 1>day we bring you insight and analysis into the most

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<v Speaker 1>important legal news of the day. You can find more

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<v Speaker 1>episodes of the Bloomberg Law Podcast on Apple Podcasts, SoundCloud

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<v Speaker 1>and on Bloomberg dot com slash podcasts. Well, the ink

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<v Speaker 1>is barely dry on the Republican tax bill, but some

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<v Speaker 1>states are already gaming the overhaul with plans for workarounds

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<v Speaker 1>or lawsuits. New York and California are leading the efforts,

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<v Speaker 1>and state governments will also try to shield their residents

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<v Speaker 1>from tax heights. They'll suffer from a sharp reduction in

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<v Speaker 1>state and local deductions by changing their tax codes. My

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<v Speaker 1>guest is Michael No, professor at the University of Pennsylvania

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<v Speaker 1>Law School. Michael first explained the new cap on salt

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<v Speaker 1>deductions and the states it will hit most well. The

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<v Speaker 1>cap is ten thousand dollars a year maximum deduction for

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<v Speaker 1>individuals to take for state and local taxes, which will

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<v Speaker 1>include income taxes, sales taxes, and property taxes. And not surprisingly,

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<v Speaker 1>the states likely to be hit hardest are those with

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<v Speaker 1>high tax rates, high property prices, and wealthy people, so

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<v Speaker 1>mostly along the East Coast and the West coast of

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<v Speaker 1>the United States. In California, legislators planned to introduce laws

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<v Speaker 1>intended to sidestep the new federal cap. What's the work

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

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<v Speaker 1>a number of states have looked at a number of alternatives.

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<v Speaker 1>One alternative is to provide a credit against the state

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<v Speaker 1>income tax for certain forms of charitable contributions basically charitable

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<v Speaker 1>contributions to the state or to various state programs. That

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<v Speaker 1>seems to be the one that's getting the most attention.

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<v Speaker 1>Another suggestion has been to replace the current state income

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<v Speaker 1>tax with a wage tax that's imposed on the employer,

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<v Speaker 1>because employer, state and local taxes will still be deductible.

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<v Speaker 1>So in New York, Governor Cuomo is considering the plan

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<v Speaker 1>that you just mentioned of shifting the state's revenue collections

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<v Speaker 1>from income to payroll taxes. How hard would that be

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<v Speaker 1>to design and implement? Oh, that is going to be

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<v Speaker 1>difficult to make work, um assuming even that it would

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<v Speaker 1>pass muster with the authorities, that is, with the federal

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<v Speaker 1>tax authorities. The problem is we've got in states such

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<v Speaker 1>as New York, not a flat tax, but a tax

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<v Speaker 1>that is progressive runs a bunch of different rates, long

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<v Speaker 1>term contracts for many employees. Uh, and those employees who

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<v Speaker 1>are not necessarily going to buy oh, just because the

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<v Speaker 1>state has changed the way for collecting taxes that my

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<v Speaker 1>salaries should therefore drop um. And so there those practical problems,

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

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

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<v Speaker 1>what kind of the federal government? In fact? Today on

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<v Speaker 1>Bloomberg TV, Chump's top economic advisor Gary Cohen said the

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<v Speaker 1>federal government would have to evaluate these state plans because

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<v Speaker 1>it would mean that a lot of revenue would not

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<v Speaker 1>be getting to the government to fund the corporate tax

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<v Speaker 1>cuts at the center of the overhaul plan. What could

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

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<v Speaker 1>let's start with the charitable approach, with the idea of

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<v Speaker 1>taking charitable deductions. In that case, what happens is the

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<v Speaker 1>I R S and the Treasury could take the position

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<v Speaker 1>that those contributions aren't really charitable contributions because you're getting

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<v Speaker 1>something in exchange, you're getting a reduction in your tax

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<v Speaker 1>and therefore you wouldn't be and shouldn't be entitled to

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

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<v Speaker 1>a few small matters which suggests otherwise, but nothing wide scale,

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<v Speaker 1>and it would be fairly easy for Treasury to reverse

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<v Speaker 1>uh any authority in those cases. If we talk about

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<v Speaker 1>a wage tax, it's a little tougher because that is

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<v Speaker 1>much more well established that the wage tax is going

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<v Speaker 1>to be deductible by the employer. That likely would take

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<v Speaker 1>stronger action. U. I'm not sure if it could be

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<v Speaker 1>done solely by the Treasury or if it would require

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<v Speaker 1>congressional action as well. So what you're talking about then

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<v Speaker 1>is possibly a long haul before this gets settled, and

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<v Speaker 1>before even if the federal government succeeds, before the states

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<v Speaker 1>end up having to turn that money over. Um. Well,

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<v Speaker 1>wouldn't be the states that have to turn the money over.

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<v Speaker 1>It would be the individual taxpayers who have to turn

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<v Speaker 1>the money over, And that is in fact who the

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<v Speaker 1>I R s would likely have to go after. There,

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<v Speaker 1>the individual taxpayers are the money because for example, the

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<v Speaker 1>charitable deductions aren't real charitable deductions. But wouldn't it would

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<v Speaker 1>take a long time, wouldn't It will be be very

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<v Speaker 1>messy and a lot of UH lawsuits involved. Well, I

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<v Speaker 1>think the treasuring the I R s who have some

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<v Speaker 1>time because it's only started a couple of days ago.

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<v Speaker 1>The new law only applies to and beyond UH, they're

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<v Speaker 1>likely to get out in front and start at least

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<v Speaker 1>providing guidance. But you are ultimately right that those matters

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<v Speaker 1>still will go to the courts, but individuals will be

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<v Speaker 1>the ones who would have to step up, uh, not

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<v Speaker 1>the taxing, not the states. And you know, politically it

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<v Speaker 1>could be pretty ugly. It sounds like it is going

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<v Speaker 1>to be a while before it works itself out. We'll

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<v Speaker 1>see what happens in California and New York, which you're

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

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<v Speaker 1>Michael Nol of the University of Pennsylvania Law School. What's

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<v Speaker 1>one of the best ways to get the public to

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<v Speaker 1>want to read a book? Try to stop its publication

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<v Speaker 1>and threatened to sue over it. President Trump has done

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<v Speaker 1>just that and trying to still up the publication of

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<v Speaker 1>the new expose about him, Fire and Fury inside the

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<v Speaker 1>Trump White House by journalist Michael Wolf. The book shot

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<v Speaker 1>up to number one on Amazon's best seller list, and

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<v Speaker 1>the publisher moved up the publication to today. Wolf tweeted

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<v Speaker 1>yesterday you can buy it and read it tomorrow. Thank you.

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<v Speaker 1>Mr President. Wolfe defended his book on the NBC News

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<v Speaker 1>Today Show. My credibility is being questioned by a man

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<v Speaker 1>who has less credibility than perhaps anyone who has ever

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<v Speaker 1>walked on earth at this point, My guest is Peter Henning,

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<v Speaker 1>professor at Wayne State University Law School. Peter Trump has

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<v Speaker 1>repeatedly threatened lawsuits and very often has not followed through.

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<v Speaker 1>But let's talk about if he did sue. The extremely

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<v Speaker 1>high hurdle that Trump would face if he filed a

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

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<v Speaker 1>certainly he is, and um, you know whether his youngest

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<v Speaker 1>son would be as a different issue, but it's the

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<v Speaker 1>standard here comes from a case in the early nineteen

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<v Speaker 1>sixties New York Times versus Sullivan where for public figures. Uh,

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<v Speaker 1>what he would have to show. What the President would

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<v Speaker 1>have to show is that the any falsity um in

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<v Speaker 1>the book was either done knowingly or at least with

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<v Speaker 1>reckless disregard for the truth. And that is a very

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<v Speaker 1>high standard because do people make mistakes. Absolutely, and if

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<v Speaker 1>you are talking about opinions or shading, the placement of

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<v Speaker 1>anecdotes or how someone emphasized something, uh that that's not

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<v Speaker 1>going to show a reckless disregard for the truth. So

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<v Speaker 1>to win a defamation case, um, when you're a public

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<v Speaker 1>figure yourself, it's very difficult and frankly may not even

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<v Speaker 1>be worth the candle. Trump's lawyers are also attempting to

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<v Speaker 1>hold Steve back into a non disclosure agreement they said

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<v Speaker 1>he signed with Trump and his presidential campaign that was

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<v Speaker 1>unusually broad. What problems do they face here, Well, certainly

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<v Speaker 1>that anything that Bannon said, um while he was affiliated

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<v Speaker 1>with the campaign would come under that nondisclosure agreement. The

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<v Speaker 1>question would be, uh, something that broad in the non

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<v Speaker 1>disparagement clause. Whether that could even be enforced in court

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<v Speaker 1>is an open question. But once Bannon transitioned over to

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<v Speaker 1>working in the White House, he was no longer working

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<v Speaker 1>for Donald Trump, even though Donald Trump in fact did,

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<v Speaker 1>as the president says, fire him. But Bannon worked for

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<v Speaker 1>the office of the President of the United States, and

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<v Speaker 1>that's not just Donald Trump. So whatever that agreement was,

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<v Speaker 1>the confidentiality, non disparagement that applied to the campaign period,

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<v Speaker 1>not when Bannon was working for the United State's government.

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<v Speaker 1>He was a public employee like any other public employee,

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<v Speaker 1>and he can disclose information as long as it's not

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<v Speaker 1>top secret or otherwise confidential. Uh, he is allowed to

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<v Speaker 1>disclose that and discuss it. That's that's what the First

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<v Speaker 1>Amendment is there for. And so would they win on

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<v Speaker 1>this fight. Maybe they would, but the cost would be

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

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<v Speaker 1>for a moment the reasons any lawsuit might fail and

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<v Speaker 1>talk about the practicalities of a lawsuit. It would open

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<v Speaker 1>Trump up to pre trial discovery, the request for documents

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<v Speaker 1>or depositions. Talk about how extensive that could be. Well, certainly,

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<v Speaker 1>if this filing is in state court, where that's generally

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<v Speaker 1>where defamation, libel, and slander cases are brought, there's not

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

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

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<v Speaker 1>d c. Whatever the applicable rules are in The discovery

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<v Speaker 1>rules in civil cases are really quite broad that you

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<v Speaker 1>just need to show a possible connection between what is

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<v Speaker 1>being sought and evidence that would be useful at trial.

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<v Speaker 1>And certainly the president would be deposed. Others who might

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<v Speaker 1>have made comments in the book could be deposed, people

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<v Speaker 1>who were present for conversation. So you're really talking about

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<v Speaker 1>opening up a box that I'm not sure the president

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<v Speaker 1>would want to have opened. And of course, for a

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<v Speaker 1>defamation case in the United States, certainly truth is a defense.

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<v Speaker 1>And so if you are claiming that there is a

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<v Speaker 1>false statement here or you're gonna have to prove you

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<v Speaker 1>the plaintiff are going to have to prove that it

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<v Speaker 1>was a false statement. Trump is also facing himself a

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<v Speaker 1>defamation lawsuit brought by a former contender on the Apprentice

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<v Speaker 1>TV show. So what would his suing ban in expose

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<v Speaker 1>him to in that suit. Well, one of his arguments

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<v Speaker 1>in that lawsuit, which was filed in state court in

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<v Speaker 1>New York by a former Apprentice contestant, is that the

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<v Speaker 1>president can't be sued um when uh he is president

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<v Speaker 1>of the United States. That the case at a minimum

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<v Speaker 1>has to be held over until after his term is concluded,

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<v Speaker 1>whether that before eight years. To them turn around and

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<v Speaker 1>sue in state court essentially would be saying, uh, you

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<v Speaker 1>can't sue me. But I can sue you, and judges

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<v Speaker 1>don't really care for having a litigant speak out of

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<v Speaker 1>both sides of his or her mouth, So it would

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<v Speaker 1>make it more difficult to get that apprentice lawsuit dismissed.

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<v Speaker 1>And there any number of challenges to getting that lawsuit

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<v Speaker 1>dismissed anyway, as we know from the Clinton period, Uh,

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<v Speaker 1>the Supreme Court said that at least in federal court,

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<v Speaker 1>a sitting president can be sued. Uh. So whether Mr

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<v Speaker 1>Trump wants to go down that road, it presents a

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<v Speaker 1>number of difficulties for him. And Peter, you mentioned the

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<v Speaker 1>First Amendment. Let's just talk a little bit about the

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<v Speaker 1>core values of the First Amendment that include the political

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<v Speaker 1>speech that it seeks to protect. Oh, certainly, and uh,

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<v Speaker 1>this book, Mr Wolf's book is about the president now

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

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<v Speaker 1>so much a policy book, but that would probably fall

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<v Speaker 1>more into the tell all or tabloid uh category. But still,

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<v Speaker 1>the life and decision making of a president are matters

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<v Speaker 1>of public interest, and so it could reasonably be described

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<v Speaker 1>as political speech, which, as the Supreme Court has said,

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<v Speaker 1>gets the highest level of protection. And of course, also

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<v Speaker 1>we're talking about someone a journal in the media, publishing

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<v Speaker 1>books is like publishing newspapers or being on Bloomberg Radio.

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<v Speaker 1>That this is a highly protected area. And so there

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<v Speaker 1>was talk of trying to stop the publication of the book,

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<v Speaker 1>and that that's not going to go anywhere. Um, no

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<v Speaker 1>judge is going to stop a book from being published.

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

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<v Speaker 1>I have to stop you there, but and you can

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<v Speaker 1>go back to reading the book now. That's Professor Peter

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<v Speaker 1>Hending of Wayne State University Law School. Thanks for listening

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<v Speaker 1>to the Bloomberg Law Podcast. You can subscribe and listen

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<v Speaker 1>to the show on Apple Podcasts, SoundCloud, and on Bloomberg

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<v Speaker 1>dot com slash podcast. I'm June Brosso. This is Bloomberg