CNBC Exclusive Transcript: New York Gov. Andrew Cuomo Speaks With CNBC's POWER LUNCH Today

Following is the unofficial transcript of a CNBC interview with New York Governor Andrew Cuomo on CNBC's "Power Lunch" (M-F 1PM-3PM) today, Thursday, December 28, 2017.

MELISSA LEE: A POTENTIAL LEGAL BATTLE MAY BE BREWING OVER THE NEW TAX LAW. NEW YORK GOVERNOR ANDREW CUOMO SAYING TODAY THE STATE MAY CHALLENGE THE CONSTITUTIONALITY OF THE LAW AND MAY ALSO RESTRUCTURE THE STATE'S OWN TAX CODE. WITH US NOW IS NEW YORK GOVERNOR ANDREW CUOMO. GOVERNOR CUOMO, THANKS SO MUCH FOR JOINING US.

GOVERNOR ANDREW CUOMO: THANKS FOR HAVING ME. HAPPY HOLIDAYS TO YOU.

LEE: HAPPY HOLIDAYS TO YOU AND HAPPY NEW YEAR. ON WHAT GROUNDS WOULD YOU CHALLENGE THE CONSTITUTIONALITY OF THIS? IS IT SPECIFICALLY BECAUSE YOU THINK THIS DISCRIMINATES AGAINST DEMOCRATIC STATES?

CUOMO: WELL, IT'S NOT THAT I THINK, IT DOES, RIGHT? LOOK AT THE BILL. THEY STARTED BY SAYING THAT THEY WERE GOING TO DO A CUT FOR THE MIDDLE CLASS, THE WORKING MEN AND WOMEN. IT WAS A BAIT AND SWITCH, IT HAD NOTHING TO DO WITH THE WORKING MEN AND WOMEN. THE THEORY WAS WE'LL GIVE A TAX CUT TO THE RICH AND TO THE BIG CORPORATIONS AND WE HOPE CORPORATIONS WILL PASS IT ON IN TERM OF HIGHER WAGES. YES, THEY MIGHT, OR THEY MAY DIVIDEND IT OUT, THEY MAY PUT IT IN THEIR POCKET, OR THEY MAY BUY A HOUSE IN THE SOUTH OF FRANCE. IF YOU ACTUALLY WANTED TO HELP, THE WORKERS, YOU WOULD HAVE STIPULATED IN THE LAW, "WE'LL GIVE CORPORATIONS OF TAX CUTS BUT 50% OF IT HAS TO GO TO HIGHER WAGES." THE WAY THEY FINANCED IT WAS BY RATING THE BLUE STATES, WHY? BECAUSE THE SENATE DOESN'T HAVE ANY SENATORS FROM THE BLUE STATES. SO THEY CAME UP WITH A VERY CONVENIENT RATIONAL - WE'LL RAISE MONEY FROM THE BLUE STATES AND WELL GIVE IT TO THE RED STATES. SO NEW YORK - A BLUE STATE, CALIFORNIA - A BLUE STATE, NEW JERSEY - A BLUE STATE, THEY ARE PAYING A PENALTY. WE LOST THE DEDUCTIBILITY OF OUR STATE AND LOCAL TAXES. FIRST DOUBLE TAXATION IN THE HISTORY OF THE NATION. WHICH MEANS, THE TAXES YOU PAY TO THE STATE AND TO THE LOCAL GOVERNMENT ARE THEN TAXED BY THE FEDERAL GOVERNMENT.

LEE: RIGHT.

CUOMO: IT INCREASES OUR PROPERTY TAXES ROUGHLY 20 TO 25%. I THINK THERE'S POTENTIAL LEGAL QUESTIONS ON THAT: EQUAL PROTECTION UNDER THE LAW, DUE PROCESS UNDER THE LAW. IF I PASSED A LAW IN NEW YORK STATE THAT SAYS REPUBLICANS PAY ONE TAX RATE AND DEMOCRATS PAY ANOTHER TAX RATE, AND THE REPUBLICAN RATE IS HIGHER THAN THE DEMOCRATIC RATE, IT WOULD BE LUDICROUS. THAT IS IN ESSENCE OF THEY HAVE DONE HERE. RED STATES GET ONE BENEFIT. BLUE STATES GET ANOTHER.

LEE: GOVERNOR CUOMO, WE KNOW VERY WELL - ALL OF US HERE LIVE IN A BLUE STATE THAT'S BEING IMPACTED. ALL OF US ARE GOING TO FEEL THE PAIN OF SALT GOING AWAY. BUT AT THE SAME TIME, WHAT YOU'RE DESCRIBING SOUNDS LIKE A SCENARIO OF POLITICS. THESE ARE THE RULES OF THE GAME, THE MAJORITY WINS AND THE REPUBLICANS ARE IN THE MAJORITY. HOW DO YOU PUT FORTH THE CASE THAT THIS IS ACTUALLY UNCONSTITUTIONAL?

CUOMO: NO. BECAUSE POLITICS DOES NOT TRUMP THE LAW, RIGHT? YOU HAVE THE CONSTITUTION, YOU HAVE THE LAW. YOU HAVE DUE PROCESS, YOU HAVE EQUAL PRODUCTION. YOU CAN'T USE POLITICS JUST BECAUSE THE MAJORITY CONTROLS TO OVERRIDE THE LAW. I HAVE, I'M A DEMOCRAT I'M IN A DEMOCRATIC STATE, I CAN'T SAY, "REPUBLICANS PAY A HIGHER TAX RATE, TOO BAD, DEMOCRATS ARE IN THE MAJORITY." IT VIOLATES DUE PROCESS AND EQUAL PROTECTION. AND THE SAME APPLIES TO CONGRESS. THEY'RE NOT ABOVE THE LAW, RIGHT? WE HAVE A CONSTITUTION OF THE UNITED STATES, WE HAVE A BODY OF LAW. YOU CANNOT VIOLATE THAT, YOU'RE NOT A KING, YOU'RE NOT A MONARCHY YOU LIVE WITHIN.

TYLER MATHISEN: YEAH, I WOULD -- LET ME ASK YOU A COUPLE QUESTIONS, GOVERNOR, AND I'M SO GLAD YOU CAN BE WITH US, AND I'M REALLY NOT TAKING A SIDE ON THIS, BUT I GUESS ONE REJOINER TO WHAT YOU JUST SAID WOULD BE THAT YOU WOULD SEE IT AS DE FACTO DISCRIMINATORY AGAINST BLUE STATE RESIDENTS, BUT THE LAW THAT LIMITS THE DEDUCTIBILITY OF STATE AND LOCAL PROPERTY TAXES OR STATE AND LOCAL INCOME TAXES APPLIES ACROSS THE COUNTRY NO MATTER WHETHER IT'S A DEMOCRATIC STATE OR REPUBLICAN STATE. THAT'S NUMBER ONE. BUT I'D LIKE TO GET - I'D LIKE TO GET YOUR ANSWER TO THAT, AND THEN SECOND, WHEN WE'VE DEBATED THIS, PEOPLE FROM LOW TAX SORT OF HEARTLAND RED STATES, WHETHER IT'S INDIANA OR WHETHER IT'S IOWA, OR WHATEVER, THEY WOULD SAY THAT THERE'S A FUNDAMENTAL UNFAIRNESS IN ALLOWING THE TAXPAYER FROM NEW YORK OR NEW JERSEY OR CALIFORNIA TO DEDUCT SO THAT THEY, THEMSELVES, THEN ON AN EQUAL AMOUNT OF INCOME PAY MORE FEDERAL TAXES THAN WE DO.

CUOMO: YEAH. TWO POINTS.

MATHISEN: RIGHT.

CUOMO: ONE, YOU CAN COME UP WITH A LAW THAT APPLIES DISPROPORTIONATELY. I COME UP WITH A LAW THAT SAYS, IF YOU OWN A CADILLAC, YOU WILL PAY A HIGHER TAX. YES, BUT I KNOW THAT 80% OF THE PEOPLE WHO OWN CADILLACS ARE REPUBLICANS. SO THERE'S A DISPROPORTIONATE APPLICATION OF THE LAW. SECOND, IN TERMS OF PEOPLE IN ONE STATE AGAINST ANOTHER STATE, THERE IS NO STATE IN THE UNITED STATES OF AMERICA THAT PAYS INTO THE FEDERAL GOVERNMENT MORE AND GETS BACK LESS THAN NEW YORK STATE. WE SEND IN $48 BILLION MORE THAN WE GET BACK. WE SUBSIDIZE EVERY OTHER STATE. THIS ACTUALLY AGGRAVATES THAT INJUSTICE BY HAVING US PAY NOW $16 BILLION MORE IN THE LOSS OF THE DEDUCTIBILITY OF STATE AND LOCAL TAXES. SO WE SUBSIDIZE EVERYBODY ELSE. NOW, WE ARE A RICHER STATE, SO WE PAY A HIGHER LEVEL OF FEDERAL TAX. BUT IT'S NOT EVEN CLOSE AS TO THE EQUITY AMONG THE STATES. WE ARE THE NUMBER ONE AGGRIEVED STATE BY GETTING BACK LESS THAN WE SEND IN. WE SUBSIDIZE EVERY OTHER STATE AND THIS AGGRAVATES THAT INJUSTICE.

LEE: GOVERNOR? ONE - WE'RE OUT OF TIME.

CUOMO: YES.

LEE: BUT I'VE GOT ONE LAST QUICK QUESTION. ARE YOU SUING?

CUOMO: WE'RE LOOKING AT THE LAW RIGHT NOW. BECAUSE I THINK THERE ARE SERIOUS LEGAL QUESTIONS.

LEE: OK. ALL RIGHT. GOVERNOR, THANKS SO MUCH FOR YOUR TIME. WE DO APPRECIATE IT.

CUOMO: THANK YOU.

LEE: GOVERNOR ANDREW CUOMO.

CUOMO: HAPPY HOLIDAYS, HAPPY NEW YEAR.

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