Blue states file appeal in legal battle over SALT tax deductions

Four blue states that had unsuccessfully sued the IRS over a new $10,000 cap on the federal deduction for state and local taxes filed an appeal on Tuesday.

New York, New Jersey, Connecticut and Maryland originally filed suit against the Treasury Department, Treasury Secretary Steven Mnuchin and the IRS, among others, in July 2018.

They alleged that the new limit on the so-called SALT deduction, part of the Tax Cuts and Jobs Act of 2017, was “an unconstitutional assault on states’ sovereign choices.”

U.S. District Judge J. Paul Oetken in Manhattan dismissed the suit on Sept. 30, saying the plaintiffs ultimately failed to show that the SALT cap was unconstitutionally coercive or that it imposed on their own sovereign rights.

The four states are challenging the dismissal, and filed their appeal in the U.S. Court of Appeals for the Second Circuit.

“The Trump Administration’s SALT policy is retribution politics — plain and simple,” New York Gov. Andrew Cuomo said in a statement.

“New York is already the nation’s leader in sending more tax dollars to Washington than we get back every year, and we will not allow this administration to pick the pockets of hard-working New Yorkers to fund tax cuts for corporations and send even more money to red states.”

In 2016, New Yorkers writing off state and local taxes took an average SALT deduction of $21,779, according to the Tax Policy Center.

The average deductions in New Jersey and Connecticut were $18,092 and $19,563, respectively.

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