Judge J. Paul Oetken dismissed a challenge on Monday to the Republican-led tax overhaul filed last year by New York, New Jersey, Connecticut and Maryland. The tax law capped a deduction for state and local taxes at $10,000. The deduction, known as SALT, was especially popular in high-tax, Democratic states, where many homeowners saw large increases in their federal tax bill after the cap was enacted.
The four blue states sued Treasury Secretary Steven Mnuchin and the Internal Revenue Service in July 2018, alleging that the cap was "an unconstitutional assault on states' sovereign choices." Oetken said in his dismissal that the states failed to show that the cap was unconstitutionally coercive.
"The cap, like any federal tax provision, will affect some taxpayers more than others and, by extension, will affect some states more than others," Oetken wrote. "But 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."
Democratic New York Gov. Andrew Cuomo called the SALT cap "unprecedented, unlawful, punitive and politically motivated" in a statement Monday. "We disagree with the court's decision and are evaluating all options including appeal," he added.