Paul L. Caron
Dean


Tuesday, October 1, 2019

NY Times: Tax Law’s Cap On State And Local Deductions Is Upheld By Court

New York Times, Tax Law’s Cap on State and Local Deductions Is Upheld by Court:

Congress didn’t unconstitutionally penalize Democratic-leaning states when it imposed a cap on federal deductions for state and local taxes, a federal judge ruled Monday.

The 2017 federal tax law, which President Trump signed after a party-line vote in Congress, limited to $10,000 the state and local tax payments that families can write off on their federal income taxes if they itemize deductions. The provision, known as the SALT cap, disproportionately affected residents of wealthy, high-tax states, where residents are more likely to have state tax bills that exceed the $10,000 limit.

Four states, including New York, sued the federal government last year, arguing that the cap is an “unconstitutional assault” on their sovereignty.

But on Monday, a Federal District Court judge in Manhattan rejected that argument. “The court recognizes that the SALT cap is in many ways a novelty,” the judge, J. Paul Oetken, wrote in his decision. “But the states have failed to persuade the court that this novelty alone establishes that the SALT cap exceeds Congress’s broad tax power.”

The other states joining in the suit were New Jersey, Connecticut and Maryland. ...

Daniel Hemel, a professor of tax law at the University of Chicago, said he wasn’t surprised that the court had rejected the states’ argument. He noted that Congress had limited the state and local tax deduction in the past, albeit indirectly, through policies such as the alternative minimum tax.

Wall Street Journal, Judge Dismisses States’ Challenge to Trump Tax Overhaul

 

https://taxprof.typepad.com/taxprof_blog/2019/10/ny-times-tax-laws-cap-on-state-and-local-deductions-is-upheld-by-court.html

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Comments

From the WSJ:

Earlier this year, Mr. Cuomo blamed an unexpected revenue shortfall on wealthy individuals moving or shifting their official residences to lower-tax states, prompted by the SALT cap, and said it was part of an “economic civil war” on New York.

Democrats in big states declared "economic civil war" on taxpayers, who, for those who can, are getting smart by leaving them for states with lower taxes. Rather than blaming Trump or Republicans, Cuomo should work for more fairness for his own citizens by reducing waste and lowering taxes.

Posted by: Woody | Oct 1, 2019 7:09:26 PM

Woody: "Democrats in big states declared 'economic civil war' on taxpayers, who, for those who can, are getting smart by leaving them for states with lower taxes."

This isn't an overstatement. I'm solidly middle class in Deep Blue California, and my effective tax rate is on the order of 25%. Most of that is state and local taxes.

I can only imagine what people wealthier than I am are hit with!

Posted by: MM | Oct 3, 2019 1:42:37 PM