New York files appeal over SALT cap

NEW YORK — New York is joining three other states in appealing a court decision against their lawsuit over a federally-instated cap on state and local tax deductions, otherwise known as SALT.

Attorney General Letitia James and Gov. Andrew Cuomo announced Tuesday that they filed an appeal in their suit against the Republican-backed 2017 Tax Cuts and Jobs Act, which capped the state and local tax deductions at the first $10,000 — a threshold too low for some of the wealthier New York property owners.

“This cap has already put a heavy burden on the hard-working, middle-class families of New York, and, in the years ahead, it is expected to cost New York’s taxpayers over $100 billion, which is why we will fight this senseless and unconstitutional law,” James said in a press release.

The initial lawsuit against the bill, filed in July 2018 alongside New Jersey, Connecticut and Maryland, argued that the SALT cap was purposely targeting New York and other states because of their high property taxes, would harm taxpayers and interferes with states’ fiscal decisions.

U.S. District Judge Paul Oetken dismissed the case in September, saying that like any federal decision, some taxpayers and states would be more affected than others.

“The cap, again like every other feature of the federal tax code, is a part of the landscape of federal law within which states make their decisions as to how they will exercise their own sovereign tax powers,” Oetken wrote in his decision.

Cuomo called the cap “retribution politics,” and joined James in claiming that New York was being “bullied” into paying more in federal taxes than they already are as one of the nation’s top donors.

“We will not allow this administration to pick the pockets of hard-working New Yorkers to fund tax cuts for corporations and send even more money to red states,” he said in Tuesday’s press release.

To E.J. McMahon, research director for the Empire Center, the lawsuit and appeal will evidently fail.

“This is not a serious legal case, it’s a political gesture,” he said. “I’m not a fan of the cap but there’s just no case here. They’re saying it’s unconstitutional for Congress to cap (SALT) deduction, but it’s pretty clear it’s not a serious argument.

Elected officials have already exhausted multiple attempts to circumvent the 2017 tax bill or minimize the effects it would have on New York taxpayers.

Cuomo, for example, created charitable donation funds that would give tax credits equal to 95 percent of a contribution. The IRS then issued regulations that block governments from giving tax credits for charitable contributions — a move that U.S. Sen. Charles Schumer, D-N.Y., tried and failed to reverse by forcing a Senate floor vote last month under the Congressional Review Act. McMahon said if anything, the IRS ruling may have a shot at being legally challenged because it was promulgated in a “confused and confusing” manner.

Last year, Cuomo allowed taxpayers to pay their 2018 property taxes before the start of the year so taxpayers could receive full deductibility this year. He also pushed for, as part of his 2018 budget proposal, reforming the state’s income tax system to a payroll tax system, so employers would pay taxes based on net wages paid and then deduct all of those taxes from their federal taxes.

Massarah Mikati covers the New York State Legislature and immigration for Johnson Newspaper Corp. Email her at mmikati@columbiagreenemedia.com, or find her on Twitter @massarahmikati.