Attorney General Brian Frosh has joined Maryland with Connecticut, New Jersey and New York in suing the federal government over capping the state and local tax (SALT) deduction through last year’s tax reform. The claim alleges that the new $10,000 SALT cap violates the U.S. Constitution’s Equal Protection Clause and the 10th Amendment, which protects states’ rights, according to Governing.
From that coverage:
Calling the deduction cap an “unconstitutional assault” on state governance, the lawsuit accuses the federal government of meddling in state taxation and fiscal policies by making it more difficult for them, politically, to raise revenue if needed.
“The new cap disregards Congress’ hitherto unbroken respect for the states’ distinct and inviolable role in our federalist scheme,” the lawsuit says. “And, as many members of Congress transparently admitted, it deliberately seeks to compel certain states to reduce their public spending.”
The New York Times article expresses similar sentiments:
The lawsuit, filed in the Southern District of New York, was dismissed as a long-shot political stunt by supporters of the new tax code, but New York Gov. Andrew Cuomo said it is a practical act of self-defense against an adversarial federal government. …
When it comes to taxing Americans, “Congress can really do what it wants,” said Tax Foundation executive vice president Joseph Bishop-Henchman. “It’s really not much of a case.”
Attorney General Frosh stated:
Eliminating the SALT deduction will jack up taxes for more than half a million Marylanders. It is an attack on state sovereignty. It will reduce funding for local law enforcement and for construction of infrastructure statewide, and it will cripple our ability to educate our kids.
taxing the internet?” (they are – they are prohibited from taxing access to the internet, not sales of things over the internet), and “Is my state going to receive a ton of revenue?” (Probably not; but, there will be some. The Government Accountability Office (GAO) estimates uncollected e-commerce revenue nationwide to be about $8-$13 billion.)
an administrator, elected official or budget officer expect to receive each year? This question has become increasingly difficult as counties still recover from the Great Recession, tax reform leads to uncertainty, and growth trends shift with an aging population and changing income sources. Even the State has modified its revenue projection processes, accounting for increased volatility. What’s a county to do?
Like in many states, Maryland’s sales tax is technically written as a “Sales and Use Tax,” meaning it obliges tax payment not only on taxable purchases within the state, but also on taxable items purchased elsewhere but brought into Maryland for use. The enforcement of those provisions, especially upon individuals, is understandably troublesome. Some Marylanders may receive notification from the Office of the Comptroller indicating a tax obligation after purchasing out-of-state furniture, for example, independent of whether the retailer collected sales tax. Taxpayers are able, and indeed obligated, to directly remit the “use tax” on such purchases. But implementation on smaller cross-border sales is administratively impossible. Efficient sales tax administration inherently relies on the seller’s willingness to calculate, collect, and remit the taxes due.