States Taking the Federal Government to Court Over Tax Changes

The battle over the Tax Cut and Jobs Act (TCJA) continues and now two several states are taking the matter to court. One of the biggest controversies of the TCJA was the reduction of the state and local income tax deduction from federal returns. Many American taxpayers used this deduction to help shave hundreds, or even thousands, of dollars off their tax bills. 

The problem is many taxpayers who live in states with high income taxes are feeling the pinch of this change, including many residents in New York and New Jersey. Several states have taken measures to find loopholes for wealth taxpayers who will be hit the hardest come tax time. 

Now, four states, including New York and Jersey, have sued the federal government in Federal District Court in Manhattan, claiming the new law is an “unconstitutional assault on their sovereignty.” 

The filing also claims, “limits on the deduction, and the potential economic damage as a result of its implementation, deliberately seeks to compel certain states to reduce their public spending.” 

The so-called “SALT deduction” places a limit on combined state and local income taxes, including property and sales taxes, of $10,000.  

While the suit has been filed, it remains to be seen how the courts will receive it, especially if it reaches the Supreme Court, which could soon lean conservative. 


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