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Gov. Andrew Cuomo. Photo: Dominick Reuter / AFP / Getty Images

New York Governor Andrew Cuomo announced that New York, New Jersey, and Connecticut are suing the federal government over the GOP tax bill, specifically over the provision that added a $10,000 limit on state and local tax deductions. High-tax states often perceive this as an effective increase on their residents' tax burden.

Why it matters: This is the latest in a series of pitches many blue, high-tax states have been launching to try and bypass the new requirements.

Repealing income taxes and replacing them with payroll taxes on the employer-side could look attractive to high-tax states since payroll taxes are still deductible, Vox’s Dylan Matthews notes. New York’s Department of Taxation and Finance proposed a program like this earlier this month, per CNBC.

  • The downside: This method doesn’t address all income types, including capital gains and investments.

Residents could donate money to their state governments, and in turn state governments could provide them tax credits for the charitable contributions. This would act as a credit against their state income tax payments since charitable contributions are still deductible, the NYT’s Ben Casselman points out. There are proposals like this circulating in California and New York right now, per CNBC.

  • The downside: Jared Walczak, senior policy analyst at the Tax Foundation, told CNBC: "These [existing program] contributions produced an actual charitable benefit, whereas the proposals involve a pure tax swap…The IRS requires that charitable contributions have genuine charitable intent and a charitable outcome."

States are also considering shifting more taxes to corporations and away from individuals, per the NYT.

  • New sources of revenue are starting to look attractive to states as well, such as legalizing and taxing marijuana.

One final strategy blue states could employ to avoid the changes to state and local taxes: Winning back Congress.

Go deeper

4 mins ago - Politics & Policy
Scoop

White House plots "full-court press" for $1.9 trillion relief plan

National Economic Council Director Brian Deese speaks during a White House news briefing. Photo: Alex Wong/Getty Images

The Biden White House is deploying top officials to get a wide ideological spectrum of lawmakers, governors and mayors on board with the president’s $1.9 trillion COVID relief proposal, according to people familiar with the matter.

Why it matters: The broad, choreographed effort shows just how crucially Biden views the stimulus to the nation's recovery and his own political success.

4 mins ago - World

Scoop: Sudan wants to seal Israel normalization deal at White House

Burhan. Photo: Mazen Mahdi/AFP via Getty

Three months after Sudan agreed to normalize relations with Israel, it still hasn't signed an agreement to formally do so. Israeli officials tell me one reason has now emerged: Sudan wants to sign the deal at the White House.

Driving the news: Israel sent Sudan a draft agreement for establishing diplomatic relations several weeks ago, but the Sudanese didn’t reply, the officials say. On Tuesday, Israeli Minister of Intelligence Eli Cohen raised that issue in Khartoum during the first-ever visit of an Israeli minister to Sudan.