New York, Connecticut, Maryland and New Jersey have asked the U.S. Supreme Court to take action that could kill the federal tax change made under the Trump Administration that put a limit on the deductibility of state and local taxes (SALT).
A Jan. 3 petition asks the Supreme Court to review a ruling by the U.S. Court of Appeals for the Second Circuit made in October that upheld a lower court”™s rejection of a lawsuit that the states had filed. The lawsuit argued that the SALT cap was a politically motivated bid by the former federal administration to interfere with the policy choices of predominantly Democratic states.
The new filing specifically asks the Supreme Court to decide “whether Congress”™s imposition of a $10,000 cap on the SALT deduction violates Article I, Section 8 and the Tenth and Sixteenth Amendments of the United States Constitution.”
The states argue, in part: “As Congress itself recognized for over 150 years, a deduction for all or nearly all state and local income and property taxes is necessary to avoid federal intrusion on state sovereign taxing authority and policies. And the $10,000 cap is also unconstitutionally coercive because it was openly targeted at a subset of politically disfavored states (including petitioners) with the goal of forcing those states to adopt different taxation and spending policies. Congress”™s tax power, while broad, does not authorize such compulsion.”
The lawsuit upon which the Court of Appeals had ruled argued that the new SALT deduction cap interfered with states”™ rights to make their own financial decisions and that it will disproportionally harm taxpayers in certain high-taxed states that happen to be controlled by Democrats.
New York Attorney General Letitia James and Gov. Kathy Hochul issued a joint statement announcing the Supreme Court filing.
“We filed this lawsuit to protect millions of New Yorkers from this harmful, misguided, and blatantly politic attack,” James said.
Hochul said, “The SALT deduction cap is nothing less than double taxation on New Yorkers. Repealing the SALT cap would not only put more money into the pockets of New York families, it would deliver a much-needed boost to New York”™s economy.”
