Some Democrat-run states are no fans of a key provision in a 2017 tax reform law signed by then-President Donald Trump, but they’re having a hard time getting it repealed.
That’s because the U.S. Supreme Court last week rejected a New York-led challenge that included Connecticut, Maryland, and New Jersey seeking to strike down a portion of the tax law known as the “SALT cap,” which limits residents in those states to deduct just $10,000 of their state and local property and income taxes.
The states claimed in court filings that the cap unconstitutionally encroached on their taxing authority.
“Congress’s taxing authority (as set forth in Article I, Section 8, and the Sixteenth Amendment) is cabined by the structural requirements of federalism, which prevent the federal government from directly interfering with the States’ ability to generate revenue to sustain their operations,” the states argued in their March court filing.
“The long history of federal income taxation demonstrates that Congress and the States equally understood that a deduction for all or nearly all state and local property and income taxes was constitutionally required to preserve state sovereign taxing authority.”
The nation’s highest court did not give a reason for refusing to hear the case.
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The SALT cap was passed by Congress during former President Donald Trump’s administration, and the Biden administration continued to defend it as this case went on.
The current Democrat-controlled House passed a bill in 2021 that would temporarily raise the cap to $80,000 until 2031, when it would go back to $10,000. The Senate has yet to take action on the bill, although a separate plan in the Senate led by Sen. Bernie Sanders, I-Vt., would cap the tax break by income, making it unlimited for individuals earning about $400,000 and phasing it down above that amount.
Republicans have criticized the bill, saying it would disproportionately benefit ultra-wealthy Americans in blue states.
Currently, the SALT cap is set to expire in 2025.
An op-ed published in Politico in October argued that repealing the SALT cap limit would make hypocrites out of Democrats who say they care about equity and racial inequality:
Reinstating the full deduction would make a hypocrite of any Democrat who claims to care about income inequality or systemic racism. That’s because the deduction is one of the biggest drivers of inequality in blue states.
In fact, unlike most debates in Congress, this one doesn’t actually pit red states against blue states. Rather, it pits the interests of wealthy blue districts against less wealthy ones. That’s why liberals who care about inequality and systemic racism should be willing to let go of the deduction.
Trump campaigned on tax cuts and reform in 2016, so getting the 2017 law passed was a major accomplishment.