Gov. Hochul and Attorney General James defend SALT cap repeal

On January 3, New York Attorney General Letitia James and New York Gov. Kathy Hochul filed a petition to the U.S. Supreme Court. The petition asks to review the court’s decision on keeping the $10,000 limit on state and local tax (SALT) deductions. 

Currently, New York, Connecticut, Maryland, and New Jersey are fighting to overturn an October 2021 ruling by the U.S. Court of Appeals for the Second Circuit. The ruling rejected the lawsuit filed by the four states. The lawsuit claims that the implementation of the SALT deduction cap was “a politically motivated bid by the former federal administration to interfere with the policy choices of predominantly Democratic states.” 

The existing SALT deduction cap was introduced in 2017 under the Trump administration. The deduction limit primarily affects residents of states with high income taxes. The policy limits the ability of states to offer income tax relief. The $10,000 deduction cap will expire after 2025. 

“This unfair cap has already placed a significant financial burden on countless hardworking, middle-class families in New York, and in the years to come, it is expected to cost New York taxpayers more than $100 billion,” Attorney General James stated in the press release. “We filed this lawsuit to protect millions of New Yorkers from this harmful, misguided, and blatantly political attack. New York will not be bullied into paying more than its fair share, and we will continue to fight back.”

The four states originally filed the lawsuit in July 2018 in the U.S. District Court for the Southern District of New York. The lawsuit argues that the 2017 Tax Act, which capped the SALT deduction limit, interferes with the sovereign authority of the states to adopt their own taxation policies. Moreover, the lawsuit claims that the deduction cap disproportionately harms taxpayers in New York and other high-income states. 

“The SALT deduction cap is nothing less than double taxation on New Yorkers,” Governor Hochul said in the statement released with the petition. “Repealing the SALT cap would not only put more money into the pockets of New York families, it would deliver a much-needed boost to New York's economy. I am proud we are taking this issue to the Supreme Court to continue to fight on behalf of New York taxpayers.”

Resources:

“Attorney General James and Governor Hochul Continue Efforts to Defend SALT Deduction,” (NYS Attorney General, 2022)

“Case 1:18-cv-06427 Document 1 Filed 07/17/18,” (United States District Court For The Southern District Of New York, 2018)

“Attorney General James and Gov. Hochul continue efforts to defend SALT deduction,” by AmNews Staff Reports (Amsterdam News, 2022)

“Hochul, James Defend Opposition to ‘Double Taxation’ of New Yorkers From SALT Cap,” by Mark Hallum (Commercial Observer, 2022)

“State and Local Tax (SALT) Deduction,” (Tax Foundation)