Four states sued the federal government Tuesday, claiming that the new $10,000 limit on state and local tax (SALT) deductions is an “unconstitutional assault on states’ sovereign choices.” The suit, which names Treasury Secretary Steven Mnuchin, acting IRS commissioner David Kautter and the United States of America among its defendants, was filed in the Southern District of New York.
The four states — Connecticut, Maryland, New Jersey and New York — assert that the SALT deduction cap, which was created in the Republican tax bill signed into law in December, violates the Sixteenth and Tenth Amendments. The Sixteenth Amendment, adopted in 1913, facilitates the federal government’s collection of income taxes, while the Tenth Amendment, which is part of the Bill of Rights and was ratified in 1791, states that all powers not explicitly delegated to the federal government by the Constitution are reserved for the states.
The suit claims that the unlimited SALT deduction is protected by the Constitution, and that the effort to limit it unfairly targeted states with higher local taxes. “This cap is unconstitutional - going well beyond settled limits on federal power to impose an income tax, while deliberately targeting New York and similar states in an attempt to coerce us into changing our fiscal policies and the vital programs they support," said New York Attorney General Barbara D. Underwood in a statement.
According to a press release from New York Governor Andrew Cuomo, the deduction cap will cost New York residents $14.3 billion in higher tax federal tax payments this year, and $121 billion between 2019 and 2025.
The suit, which has been expected for months, received little support from legal and tax experts in the hours following the announcement. Jared Walczak of the Tax Foundation tweeted, “The New York-led lawsuit challenging the constitutionality of the SALT deduction cap is very creative but not very convincing. (That's being polite.)” In a rapid-fire analysis on Twitter, University of Iowa law professor Andy Grewal wrote, “If this lawsuit succeeds, I will post a video of myself eating every single page of the Internal Revenue Code, one-by-one.”