In a surprise to no one (except the grandstanding politicians who brought legal action and did this and this) the four states (CT, MD, NJ and NY) challenging the $10,000 cap on the federal state and local tax (SALT) deduction created by the Tax Cuts and Jobs Act lost their argument.

On September 30th a federal district court dismissed the challenge that alleged the SALT cap:

  • violates the federalism principles of the U.S. Constitution
  • results in a significant increase to federal tax bills of residents in high-tax states
  • disproportionately affects the residents of high-tax states

Furthermore these states alleged a nefarious Republican motive of incenting high-tax states to lower their tax rates.

The “Big Four” lost its challenge as the court ruled the states did not prove the SALT cap exceeds Congress’ broad taxing authority.  It rejected the argument that the cap was designed to force targeted states to bring their tax policies in line with real or perceived federal preferences.