We’re Not Gonna Take It…

You may have heard that earlier this week four states sued to stop parts of the new tax law from going into effect. The states–New York, New Jersey, Connecticut, and Maryland–don’t like the new $10,000 cap on deducting state and local taxes on federal tax returns. I believe this lawsuit is doomed; there’s no right in the Constitution to allow deducting of such taxes. This isn’t just my opinion; Ilya Somin at the Volokh Conspiracy notes what I think:

They argue not only that the 2017 cap is unconstitutional, but that the federal government has a general obligation to exempt “all or a significant portion of state and local taxes” from the federal income tax. The problem with this argument is simple: nothing in the text or original meaning of the Constitution supports it. To the contrary, the Sixteenth Amendment gives Congress a general power to power “to lay and collect taxes on incomes, from whatever source derived.” There is no mandated exemption for income used to pay state or local taxes. There is also no support for the states’ position in Supreme Court precedent, or in the American constitutional tradition more generally.

The humorous thing (to me) is that blue states normally lead in ‘progressiveness’ of their tax systems (that is, higher rates for individuals earning higher incomes). The cap on deductions will primarily hurt high income individuals. Of course, blue states don’t want out-migration of such high income individuals. Perhaps they might look to lower tax rates. Mr. Somin notes they could remove zoning restrictions. As for this lawsuit, it sounds nice to their constituents but it is almost certainly doomed.

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