The first major development centers on New Jersey, where Governor‑elect Mikie Sherrill has publicly floated an extraordinary idea: refusing to send federal tax payments to the Trump administration. In a discussion with comedian Jon Stewart, she framed the proposal as a protest against what she sees as a broken social contract. According to her, if the federal government “isn’t going to run the programs … what are we paying them for?” She challenged the value of sending tax dollars to Washington when she believes those dollars are not returned in the form of meaningful federal services. Although she did not lay out a detailed legal mechanism for how New Jersey could withhold funds, her remarks reflect deep frustration — especially in a state often perceived as paying more in federal taxes than it receives back.

Sherrill’s rhetoric echoes similar proposals from California Governor Gavin Newsom, who previously considered withholding federal tax dollars. Newsom, too, complained that individual taxpayers and states send vast sums to Washington without commensurate returns in federal investment. However, Newsom acknowledged the difficulty of acting: taxes are collected not by states, but by the federal government from individuals and businesses, making the practicalities of withholding nearly impossible. While neither governor has presented a fully formed legal strategy, the very suggestion points to a growing political strain between fiscally supportive states and a federal government perceived as under‑delivering.

In a separate but politically resonant thread, a federal judge issued a ruling that has major implications for taxpayer privacy and the IRS’s sharing of data with Immigration and Customs Enforcement (ICE). U.S. District Judge Colleen Kollar‑Kotelly concluded that the IRS’s “Address‑Sharing Policy” — under which it disclosed taxpayers’ home addresses to ICE — was unlawful. The judge found that the IRS failed to justify its shift from decades of strict confidentiality, violated provisions of the Internal Revenue Code (IRC), and acted in a way that is “arbitrary and capricious,” in violation of the Administrative Procedure Act.

According to court documents, ICE had initially requested data on millions of taxpayers, which the IRS pared down to about 1.28 million “immigrant taxpayers” under an April 2025 Memorandum of Understanding. In August, the IRS disclosed address data for approximately 47,000 individuals to ICE, sparking a lawsuit from civil‑rights and taxpayer‑privacy groups.  The plaintiffs — including the Center for Taxpayer Rights — argued that this practice undermined long-standing expectations of confidentiality, particularly for immigrant taxpayers who rely on privacy in order to file returns safely.

Judge Kollar‑Kotelly’s order temporarily halts further sharing, with strict conditions: ICE may only use the information for non‑tax criminal investigations, and only specific ICE or DHS personnel “personally and directly engaged” in those investigations can access it. She also ordered the IRS to notify the court at least 72 hours in advance if it considers future disclosures, reinforcing a new level of judicial guardrails. The ruling was hailed by advocates as a critical defense of taxpayer trust and a check on what they view as overreach from immigration enforcement.

Legal analysts suggest the fallout could be substantial. The data-sharing agreement under scrutiny was not only about locating undocumented immigrants — some experts argue that ICE could also use the information for payroll tax enforcement, creating a powerful tool for cross-agency enforcement that conflates tax policy with immigration control. By blocking the program, the court reinforces the principle that taxpayer confidentiality is not optional and protects a long tradition of legal limits on information sharing. Moreover, the judge’s ruling could set a precedent: future efforts to link tax data to immigration enforcement may face greater judicial resistance absent a solid legal basis.

These two stories — Sherrill’s tax‑withholding threat and the court’s rebuke of IRS–ICE coordination — converge in a broader narrative about federal power, trust, and accountability. On one hand, state leaders are sounding the alarm on fiscal inequities and threatening bold, if legally uncertain, rebellions against what they perceive as federal neglect. On the other, the courts are affirming that data-sharing policies must respect long-established legal protections, even amid political pressure. Both developments reflect growing tension over how federal resources and personal information are used, and highlight the role of checks and balances in an era of aggressive policy shifts.