Democrats plot to blunt impact of new tax reform

New York

DEMOCRATS in high-cost, high-tax states are plotting ways to do what their states' representatives in Congress could not: Blunt the effect of the newly passed Republican tax overhaul.

Governors and legislative leaders in New York, California and other states are considering legal challenges to elements of the law that they say unfairly single out parts of the country. They are looking at ways of raising revenue that are not penalised by the new law. And they are considering changing their state tax codes to allow residents to take advantage of other federal tax breaks - in effect, restoring deductions that the tax law scaled back.

One proposal would replace state income taxes, which are no longer fully deductible under the new law, with payroll taxes on employers, which are deductible. Another idea would be to allow residents to replace their state income tax payments with tax-deductib…