Supreme Court Declines New York’s Challenge to Trump-Era Federal Cap on State and Local Tax Deductions

Matthew Vadum
By Matthew Vadum
April 18, 2022US News
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Supreme Court Declines New York’s Challenge to Trump-Era Federal Cap on State and Local Tax Deductions
The U.S. Supreme Court in Washington on Feb. 8, 2022. (Mandel Ngan/AFP via Getty Images)

The Supreme Court decided on April 18 not to hear an appeal from New York and three other Democrat-dominated northeastern states that were challenging the cap on state and local tax (SALT) deductions imposed by President Donald Trump’s 2017 tax law.

The case is New York v. Yellen, court file 21-966. Janet Yellen was being sued in her official capacity as secretary of the U.S. Department of the Treasury. The respondents were New York, New Jersey, Connecticut, and Maryland.

According to its usual practice, the high court did not provide reasons why it refused to take up the case.

The four states sued Yellen’s predecessor, then-Secretary of the Treasury Steven Mnuchin, and the IRS in July 2018 after the Tax Cuts and Jobs Act of 2017—a tax reform law that was backed by Trump—took effect.

The states claimed that the SALT deduction cap was unconstitutional, but this argument has found no takers in the judicial system. Specifically, the states had argued that Congress’s imposition of a $10,000 cap on the deduction of state and local property and income taxes from federal taxable income violates Article I, Section 8, as well as the 10th and 16th Amendments to the U.S. Constitution.

A federal district court ruled against the states in 2019, and in October 2021 the U.S. Court of Appeals for the 2nd Circuit did the same.

The statute lowered tax rates, broadened the standard deduction and child tax credit, and limited the alternative minimum tax and various popular deductions, including the SALT deduction, which was previously unlimited. Most Americans received a net tax cut, according to the Tax Foundation.

Some economists say that limiting the SALT deduction supports economic growth because it puts pressure on high-tax states, such as those participating in this lawsuit, to lower their tax rates. They also say it’s the fairer approach because it stops the residents of low-tax states from effectively subsidizing those in high-tax states.

This is a developing story. This article will be updated.

From The Epoch Times

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