LIEB BLOG

How current events impact business & real estate

Showing posts with label Tax Cuts and Jobs Act. Show all posts
Showing posts with label Tax Cuts and Jobs Act. Show all posts

Tuesday, October 05, 2021

SALT Tax Deduction Limit is Valid per Second Circuit Court of Appeals

Back in 2017, the Tax Cuts and Jobs Act capped SALT deductions at $10,000. 


To remind you, SALT deductions permit "taxpayers to deduct from their taxable income all the money they paid in state and local income and property taxes." As a result, it saves residents in high tax states from having to pay a lot of money to the federal government because they already paid a lot of tax to their state. States like New York, Connecticut, New Jersey, and Maryland have really high state and local taxes and therefore, residents of these states were hurt the most when Congress capped SALT deduction at $10,000. 


To fight for their citizens and for their sovereignty, these four states sued the federal government "asserting that Congress's new cap on the SALT deduction either is unconstitutional on its face of unconstitutionally coerces them to abandon their preferred fiscal policies." 


Stated otherwise, the states argued "that the SALT deduction cap violates both Article I, Section 8 and the Tenth Amendment [and the Sixteenth Amendment] because it coerces them to lower taxes or cut spending."


The states lost in New York v. Yellen and the $10,000 cap remains. 


According to the Second Circuit, the states failed to demonstrate "how the 2017 cap on the deduction unconstitutionally undermines their state sovereign authority over fiscal matters or their ability to raise revenue." 


Yet, it seems pretty intuitive, no?


Do you think this should go to the Supreme Court? 


If not, will a Democratic Congress, led by a Senator from New York, act to reinstitute the full SALT Tax Deduction, which has been the law of the land since 1913 when the 16th Amendment was ratified and Congress first became empowered to "lay and collect taxes on incomes, from whatever source derived without apportionment among the several states"?