High Tax States Sue Over Caps On State And Local Tax Deductions

people line up to pay their taxes

Four states known for their high taxes have filed a lawsuit against the Trump administration claiming that a cap on deductions for state and local taxes is unconstitutional. New York, New Jersey, Connecticut, and Maryland filed a lawsuit in the Southern District of New York that claims the new tax law targets them and interferes with their constitutionally granted taxing authority. 

“This cap is unconstitutional - going well beyond settled limits on federal power to impose an income tax,” New York Attorney General Barbara Dale Underwood said in a statement announcing the lawsuit. 

The new tax law caps the amount of money from state and local taxes that individuals can deduct at $10,000. States with high income and property taxes are worried that the new law will impact their residents, forcing them to pay billions more in taxes. 

"The federal government is hell-bent on using New York as a piggy bank to pay for corporate tax cuts and I will not stand for it," New York Governor Andrew Cuomo said.

The lawsuit estimates the New Yorkers will be saddled with an extra $14.3 billion in federal taxes in 2018 and at least $121 billion between 2018 and 2025. 

Joseph Bishop-Henchman, executive vice president at the Tax Foundation, told CNBC that the "lawsuit probably won’t go anywhere. But they can go to angry high-income people and say we tried to do something."

Photo: Getty Images


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