Blue States Sue Trump Administration Over SALT Tax Rule

Blue States Sue Trump Administration Over SALT Tax Rule

© Enrique de la Osa / Reuters

New York, New Jersey and Connecticut filed a lawsuit against the Trump administration Wednesday as part of their effort to overturn the federal cap on state and local tax deductions.

The 2017 tax law, which passed without any Democratic support in Congress, placed a $10,000 limit on the so-called SALT deduction. Some lawmakers from Democratic-leaning states have charged that the provision unfairly affects their residents, who tend to pay higher state and local taxes.

New Jersey Gov. Phil Murphy said Wednesday that the SALT cap “was a complete and utter politicization of the tax code” that targeted blue-leaning states in order to cover some of the cost of the GOP tax cuts. Earlier this year, New York Gov. Andrew Cuomo charged that the “SALT policy is an economic civil war that helps red states at the expense of blue states.”

The suit, which names the IRS and Treasury Secretary Steven Mnuchin, claims that the SALT deduction limit had a specific political purpose: “The cap would ‘send a message’ to states with generous social welfare programs that their tax and spending policies would need to conform to those of the administration and the Republican Congress.”

Lawrence Zelenak, a tax law professor at Duke University School of Law, told Bloomberg News that the case is a “long-shot” that is unlikely to succeed.