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Mon Sep 30, 2019, 03:39 PM

Tax Law's Cap on State and Local Deductions Is Upheld by Court

Source: New York Times

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.

The cap on state and local tax deductions, which had been unlimited, was one of a handful of provisions intended to offset the cost of trillions of dollars in tax cuts included in the 2017 law. The Joint Committee on Taxation, Congress’s nonpartisan scorekeeper on tax matters, estimated the cap and related provisions would raise close to $700 billion in revenue over 10 years.

Read more: https://www.nytimes.com/2019/09/30/business/economy/state-local-tax.html



The judge is an Obama appointee (case was argued in SDNY).

14 replies, 1475 views

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Response to BumRushDaShow (Original post)

Mon Sep 30, 2019, 03:53 PM

1. I don't see a constitutional issue. Just a shitty law that needs to be

undone when we win next year.

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Response to NYC Liberal (Reply #1)

Mon Sep 30, 2019, 06:13 PM

3. ++++ agree, totally. #BlueWave2020. nt

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Response to NYC Liberal (Reply #1)

Mon Sep 30, 2019, 06:53 PM

4. Need Austerity Backstop Legislation

Said this before and I'll say it again, we need to legislate some type of backstop into the tax law that will impose any type of austerity measures on states that receive more federal monies than they pay in taxes. There are too many states that offset their crappy tax bases by taking federal money from states that pay more into federal coffers than they receive.

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Response to modrepub (Reply #4)

Mon Sep 30, 2019, 08:53 PM

5. Totally agree.

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Response to modrepub (Reply #4)

Tue Oct 1, 2019, 12:48 AM

6. Transfer Payment Equalization Act of 2021.

No state can receive more in federal outlays that what it sends in taxes to DC, unless specifically authorized by Congress and the President for emergencies.

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Response to modrepub (Reply #4)

Tue Oct 1, 2019, 03:00 AM

9. +100 Thank you.

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Response to BumRushDaShow (Original post)

Mon Sep 30, 2019, 04:55 PM

2. Yes, they did.

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Response to BumRushDaShow (Original post)

Tue Oct 1, 2019, 01:11 AM

7. Not surprising. Why should people pay less tax to the Federal Givernment because they pay more

to their state?

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Response to PoliticAverse (Reply #7)

Tue Oct 1, 2019, 03:40 AM

10. Why should a state that pays more into the Federal government to support other states that don't

have their SALT deductions capped. They are already paying more than their fair share as it is, to the Federal government. There are some states that pay nothing into the federal government, pay next to nothing, if at all, in state tax, and get more back. It's ridiculous, and unfair. Trump needed to get money for his tax cuts, so he went after the Blue States, the ones that didn't vote for him, no coincidence there. I really hope, that after the 2020 election, Blue States get together and start working to change what is going on now. It's the same with the Electoral college...we have Trump because of it. 3.3 Million more people voted for Hillary...but he "won".
Land counts more than people? Something is really wrong, and needs to be changed.

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Response to Lady_Chat (Reply #10)

Tue Oct 1, 2019, 04:12 AM

11. If some states get more from the Federal Government than their residents pay in tax then that's what

needs to be fixed.

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Response to BumRushDaShow (Original post)

Tue Oct 1, 2019, 02:10 AM

8. Double taxation. . . . nt

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Response to Bernardo de La Paz (Reply #8)

Tue Oct 1, 2019, 04:14 AM

13. Then isn't it also "double taxation" if you can't deduct the amount you pay in Federal taxes...

from the income you report on your state taxes?

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Response to BumRushDaShow (Original post)

Tue Oct 1, 2019, 04:12 AM

12. how about a single uniform tax code

for federal, state, and local taxes

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Response to lapfog_1 (Reply #12)

Tue Oct 1, 2019, 08:54 AM

14. It'll go against "states rights".

Although I like the idea, taxation hasn't been one of those things delegated to the feds. And let's say we did have a uniform tax code across America - we would have states and localities crying poverty and requesting waivers to the code and allowing to tax certain activities, or for extra grants from the federal government to ease their local funding woes. Also states won't be able to differentiate themselves from one another in competing for business. There's a reason why there are more companies than people in Delaware and Nevada.

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