States Appeal Judge’s Decision to Toss Local Tax Deductions Lawsuit

December 3, 2019 by Tom Ramstack

WASHINGTON – Four states are appealing a federal judge’s September dismissal of their lawsuit challenging federal authority to limit state and local tax deductions.

In a filing before the 2nd U.S. Circuit Court of Appeals, attorneys for the states argue the cap unconstitutionally interferes with their clients’ 10th Amendment rights.

The underlying lawsuit also accuses congressional Republicans of deceit by trying to use the limit on deductions to raise property taxes in high-income predominantly Democratic states.

New York, New Jersey, Connecticut and Maryland originally sued the Treasury Department, Treasury Secretary Steven Mnuchin and the IRS, among others, in July 2018.

They alleged that the new limit on the so-called SALT deduction, part of the Tax Cuts and Jobs Act of 2017, was “an unconstitutional assault on states’ sovereign choices.”

But U.S. District Judge J. Paul Oetken dismissed the suit on Sept. 30, finding the plaintiffs ultimately failed to show that the SALT cap was unconstitutionally coercive or that it imposed on their own sovereign rights.

SALT in this case stands for “State and Local Taxes.”

He went on to note that the federal government has “exhaustive” authority to impose and collect income taxes.

Previously, there was no limit on the state and local tax deductions.

Lawmakers in high-tax states have tried repeatedly to overturn the SALT deductions. The cap was one of the most politically divisive parts of the Trump administration’s tax overhaul.

The judge said states have discretion to enact their own tax policies. “But the bare fact that an otherwise valid federal law necessarily affects the decisional landscape within which states must choose how to exercise their own sovereign authority hardly renders the law an unconstitutional infringement of state power,” Oetken’s ruling said.

As an apparent response to the ruling, Maryland Gov. Larry Hogan and some state General Assembly lawmakers pledged to introduce legislation that would allow residents to claim deductions at a higher rate.

A Maryland Comptroller’s Office analysis showed about 28 percent of the state’s residents would pay more in state and local taxes because of the federal law.

New York Gov. Andrew Cuomo called the Democrat-led uproar over the federal cap “economic civil war.”

New York Attorney General Letitia James said the cap “is expected to cost New York’s taxpayers over $100 billion, which is why we will fight this senseless and unconstitutional law.”

She said the $10,000 cap might make some of the 1 percent of state taxpayers who pay 46 percent of the state’s income taxes move to states where they face lower taxes.

Connecticut Attorney General William Tong called the SALT cap “an abusive and discriminatory tax hike on Connecticut.”

“This disappointing decision makes it harder for our state to protect its taxpayers from the disproportionately harmful effects of Trump’s tax law,” Tong said in a statement.The case is State of New York v. Mnuchin, 18-cv-6427, U.S. District Court, Southern District of New York.

In The News

Health

Voting

Litigation

British Court Ruling Against Oil Company Could Expand Liability for Foreign Accidents
Energy
British Court Ruling Against Oil Company Could Expand Liability for Foreign Accidents
February 19, 2021
by Tom Ramstack

A ruling by Britain's top court last week that said Royal Dutch Shell oil company could be liable in English courts for pollution by its subsidiary in Nigeria, is likely to expand the company’s potential liability abroad. The court’s decision also creates a likelihood of liability... Read More

Riot Lawsuit Just Part of Trump's Post-Impeachment Problems
Law
Riot Lawsuit Just Part of Trump's Post-Impeachment Problems

NEW YORK (AP) — Acquitted by the Senate of inciting last month's U.S. Capitol insurrection, former President Donald Trump faces more fallout from the unrest, including a lawsuit from a congressman Tuesday. But his biggest legal problems might be the ones that go much further back.... Read More

Voting Machine Company Sues Trump Lawyers and Fox News
Litigation
Voting Machine Company Sues Trump Lawyers and Fox News
February 5, 2021
by Tom Ramstack

Electronic voting systems operator Smartmatic is suing two of former President Donald Trump’s attorneys and Fox News cable network, claiming they defamed the company by accusing it of rigging the 2020 presidential election in favor of Joe Biden. The lawsuit filed in New York state court... Read More

SpaceX Accused of Discrimination Against Foreign Job Applicants
Litigation
SpaceX Accused of Discrimination Against Foreign Job Applicants
February 2, 2021
by Tom Ramstack

WASHINGTON - The Justice Department is accusing SpaceX of stonewalling for information after a job applicant filed a complaint saying the rocket company discriminates against foreign citizens. U.S. attorneys said in a court filing last week that they subpoenaed documents about an applicant’s complaint but Space... Read More

Litigants Take More Cooperative Approach in Census Lawsuit
Census
Litigants Take More Cooperative Approach in Census Lawsuit

Attorneys for a coalition of municipalities and advocacy groups that had sued the Trump administration over accuracy concerns about the 2020 census say they're hopeful about reaching an agreement with the new Biden administration as both sides take a more cooperative approach. Attorneys for the coalition... Read More

Judge Rules Against Brindisi on Ballots in NY Congressional Race
Elections
Judge Rules Against Brindisi on Ballots in NY Congressional Race
February 1, 2021
by Dan McCue

One could almost hear incumbent Rep. Anthony Brindisi sigh as he typed a tweet early last week. "Unfortunately, this is a long process," he said of the legal battle and ongoing ballot count that will ultimately decide the outcome of one of the 2020 election cycle's... Read More

News From The Well
scroll top