Four states sue U.S. to void cap on state and local tax deduction




  • In US
  • 2018-07-17 14:29:34Z
  • By Reuters
The skyline of downtown Manhattan
The skyline of downtown Manhattan  

NEW YORK (Reuters) - Four U.S. states sued the federal government on Tuesday to void the new $10,000 cap on the federal deduction for state and local taxes, included as part of the 2017 tax overhaul signed by President Donald Trump.

New York, Connecticut, Maryland and New Jersey filed their complaint with the U.S. District Court in Manhattan.

Under the cap, which takes effect this year, individuals and married taxpayers filing jointly who itemize their deductions may deduct only up to $10,000 annually for state and local income, property and sales taxes.

Previously, the deduction for state and local taxes, known as the SALT deduction, had been unlimited.

The U.S. Department of the Treasury, which is among the defendants, was not immediately available for comment.

Critics of the cap say it disproportionately harms high-tax states, many of which lean Democratic.

Voters in New York, Connecticut, Maryland and New Jersey all voted to elect Hillary Clinton to the White House in 2016.

According to the complaint, the cap will force New York taxpayers alone to pay an additional $14.3 billion in federal taxes this year, and another $121 billion through 2025, when the cap is scheduled to expire.

"The new cap on the SALT deduction is unprecedented, unlawful, and will cause significant and disproportionate injury to the plaintiff states and their residents," the complaint said.


(Reporting by Jonathan Stempel in New York; Editing by Chizu Nomiyama and Susan Thomas)

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