New York’s SALT Cap Lawsuit Dismissed by Federal Judge

A lawsuit filed by a coalition of States including New York, which challenged the imposition of a cap on the deduction of state and local taxes (SALT), was dismissedthis week by a Federal Judge. The States argued the SALT cap unfairly targeted high taxed states in a congressional effort to coerce the adoption of preferred tax policies and thus runs afoul of the Constitution and exceeds federal tax authority. The States, however, failed to persuade the Court that the SALT cap exceeded Congress’s broad tax powers under the Constitution.

Excerpt from Judge Paul Oetken’s ruling:

“In the end, Congress enacted the SALT cap pursuant to its broad tax powers under Article I, section 8 and the Sixteenth Amendment. The cap, like any federal tax provision, will affect some taxpayers more than others and, by extension, will affect some states more than others. But the cap, again like every other feature of the federal Tax Code, is part of a landscape of federal law within which states make their decisions as to how they will exercise their own sovereign tax powers. Because the states have failed to plausibly allege that the cap, more so than any other major federal initiative, meaningfully constrains this decision making process, this Court has no basis for concluding that the SALT cap is unconstitutionally coercive.”

Governor Cuomo said in reaction:

“There is no doubt in my mind that President Trump’s unfair tax policy targets New York and other blue states by funding tax cuts for corporations and the rich on the backs of New Yorkers. New York is already the largest ‘donor state’ in the nation – paying the federal government $36 billion more than we get back every year. The SALT cap takes this gross imbalance and supercharges it, costing New Yorkers another $15 billion each year. The bottom line is this policy is unprecedented, unlawful, punitive and politically motivated – and it must be stopped. We disagree with the court’s decision and are evaluating all options including appeal.”