Maryland, Connecticut, New Jersey, and New York today filed a notice of appeal to the U.S. Court of Appeals for the Second Circuit to continue litigation against the federal government for its cap on the deduction for state and local taxes (SALT).
The SALT deduction allows taxpayers to subtract state and local income, sales and property taxes from their federal tax payment. The 2017 federal tax overhaul capped SALT deductions at $10,000 – a move of particular import in states like Maryland.
The appeal challenges a September 30, 2019 ruling by the U.S. District Court for the Southern District of New York that rejected the states’ suit, which argues that the SALT cap violates the U.S. Constitution’s Equal Protection Clause and the 10th Amendment, which protects states’ rights.
According to a New York State press release:
In its September ruling, despite ruling against the State of New York and its partner states, the U.S. District Court for the Southern District of New York agreed that the states had been injured based on their argument that the cap on the state and local tax deduction may depress home prices. By effectively raising state property taxes, the SALT cap will also reduce the value of a homeowner’s property, thereby discouraging home sales and decreasing the revenues the states are able to collect by taxing such sales.
According to a report from The Government Finance Officers Association (GFOA), 45 percent of taxpayers in Maryland benefitted from the deduction in 2014, more than any other state.
Stay tuned to Conduit Street for more information.
Useful Links
Previous Conduit Street Coverage: Federal Judge Dismisses States’ Challenge to SALT Cap
Previous Conduit Street Coverage: Maryland Joins Three States In SALT Suit
Previous Conduit Street Coverage: Feds Squash SALT Cap Workarounds
Previous Conduit Street Coverage: Local Tax Deduction Elimination: “SALT” In Maryland’s Wounds
The Baltimore Sun: Judge Tosses Lawsuit that Challenged New Federal Tax Law that Limits Deductions
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