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The Trump administration’s signature tax reform law’s cap on federal deductions for state and local taxes does not violate the constitution, a federal judge ruled on Monday.
A federal judge dismissed a lawsuit filed by four states against the Internal Revenue Service, rebuffing their challenge against a new $10,000 cap on the deduction for state and local taxes, also known as SALT. Those states were New York, New Jersey, Maryland, and Connecticut.
SALT - Cap - States - Monday - Decisions
The so-called SALT cap weighs most heavily on high-tax states, including the four involved in Monday’s decisions, where state and local taxes are most likely to exceed the cap. The ability to deduct the cost of local taxes made it easier for state and municipal governments to raise those taxes because much of their costs could be deducted from federal taxes. The states had claimed that the cap was an “unconstitutional assault” on their sovereignty.
“The Court recognizes that the SALT cap is in many ways a novelty. But the States have failed to persuade the Court that this novelty alone establishes that the SALT cap exceeds Congress’s broad tax power,” U.S. District Judge J. Paul Oetken of the Southern District of New York wrote in his decision.
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Judge Oetken was appointed in 2011 to the federal court on the recommendation of Senator Charles Schumer (D-NY) and was the first openly...
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