It was Dec. 20, 2017, when both houses of Congress passed, with Republican votes only, a $10,000 limit on deducting state and local taxes. Donald Trump signed it into law two days later and it took effect Jan. 1. Democrats griped, but they had lost the 2016 election and lost the legislative fight.
By the end of January, New York, New Jersey and Connecticut announced they’d sue, and they finally filed their lawsuit in July, joined by Maryland. It was a stinker of a suit by Andrew Cuomo and company, as we said at the outset. Yes, capping this SALT deduction was unfair and politically motivated to target high-tax, Democratic-controlled states, but that’s politics and it’s not against the Constitution, as was alleged. The Founders put nothing into the 10th Amendment against winners and losers and neither did the progressives in the 16th Amendment empowering Congress to tax incomes, a change ratified in 1913.
The case was correctly shot down by a Manhattan federal judge the next year and his decision was upheld by a panel of three Manhattan federal appeals judges last fall, finding that Congress had long tinkered with the deductibility of state and local taxes on sales, property, income and even gasoline. The conclusion to the legal matter came two days ago, appropriately, or ironically, on Tax Day, when the U.S. Supreme Court declined to hear the states' appeal.
So that is that in the courts. But Congress can and still should right the wrong done nearly five years ago — not by fully reinstating the SALT deduction, which would disproportionately aid the wealthiest Americans, but by raising the cap and possibly means-testing the benefit.
President Joe Biden, Senate Majority Leader Chuck Schumer and Speaker Nancy Pelosi all have decried the GOP’s SALT cap and vowed to undo it. The House did raise the cap to $80,000, but the Senate hasn’t moved and time is running short.
If the Democrats can’t get it together before then, the law Trump signed sunsets after 2025. At least there’s that.
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