Reps. Mikie Sherrill, D-NJ, and Tom Suozzi, D-NY, at a July press conference advocating for repeal of the $10,000 SALT cap. (Courtesy of Rep. Sherrill)
A federal appeals court shot down a bid by New Jersey and three other states to remove the $10,000 cap on state and local tax deduction Tuesday.
New Jersey, along with New York, Connecticut, and Maryland, in 2018 sued the federal government in a bid to overturn the cap, charging it runs afoul of the Sixteenth Amendment. The cap disproportionately impacts the wealthy, high-tax blue states.
The states charged any federal income tax must allow residents to deduct the entirety — or a significant portion — of their local and state taxes, claiming the deduction is constitutionally mandated and arguing its absence slashes property tax collections and requires significant changes to state tax codes.
They also claimed limiting the deduction violates states’ rights granted by the 10th amendment by forcing them to abandon favored fiscal policy.
The three-judge appellate panel found those arguments unconvincing. Neither the 16th nor 10th amendments explicitly mandate the SALT deduction, and while the court agreed the cap effectively raises state and local taxes, the plaintiffs cited no laws that requires the government to shield residents from their full tax burden.
Law360 was first to report the appeal’s denial.
The office of the New Jersey Attorney General did not immediately respond to a request for comment.
The SALT cap, implemented as part of a 2017 overhaul of the nation’s tax code, has been a bread-and-butter issue for New Jersey congressional candidates since 2018, when Democratic candidates in competitive districts campaigned on its repeal. It has emerged as a sticking point in negotiations over a $3.5 trillion bill being negotiated on Capitol Hill.
Reps. Josh Gottheimer, Mikie Sherrill, Bill Pascrell, and Tom Malinowski last month said they would oppose the spending bill if it does not include a repeal of the SALT cap.
Progressive Democrats have railed against the push to uncap SALT, charging the change would disproportionately benefit wealthy residents while denying the federal government billions in revenue seen as a key funding source for President Joe Biden’s policy priorities.
The average property tax bill in New Jersey was $9,112 last year, according to figures published by the Department of Community Affairs.
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