President Trump can impose a controversial cap on deductions for state and local taxes, a judge ruled Monday, while acknowledging the policy impacting liberal states like New York was “unprecedented.”
Manhattan Judge Paul Oetken wrote that the cap on State and Local Taxes deductions, known as SALT, was within the federal government’s broad taxation powers.
“The States are correct that the SALT cap is in some ways unprecedented…the availability of an uncapped deduction for state income and property taxes (albeit not for state sales taxes) has been a mainstay of the federal income tax since that tax’s earliest inception,” Oetken wrote.
“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 a part of the landscape of federal law within which states make their decisions as to how they will exercise their own sovereign tax powers.”
Prior to Trump’s tax cuts in 2017, taxpayers could deduct from their federally taxable income all state and local property taxes. After the tax code overhaul passed by Republicans, single or jointly filing married taxpayers could not deduct more than $10,000.
Gov. Cuomo described the new rules in doomsday terms, saying they were unfairly aimed at blue states with higher taxes. He said in a statement the state was considering an appeal.
“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,” Cuomo said.
“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.”
The judge wouldn’t bite.
“This Court declines to speculate on Congress’s motives in passing the SALT cap,” Oetken wrote.
Connecticut, Maryland and New Jersey had joined New York in the suit arguing the SALT cap was an unconstitutional intrusion on states’ rights.