NEW YORK (Reuters) – A federal judge on Monday dismissed a lawsuit by four U.S. states seeking to void a $10,000 cap on federal deductions for state and local taxes, which was included in President Donald Trump’s 2017 tax overhaul.
U.S. District Judge Paul Oetken in Manhattan said New York, Connecticut, Maryland and New Jersey failed to show that the cap on the popular tax break exceeded Congress’ broad taxing power or was unconstitutionally coercive.
Oetken’s decision is a victory for the White House, which used the so-called SALT cap to help pay for other parts of the $1.5 trillion overhaul, which included cutting taxes for wealthy Americans and slashing the corporate tax rate.
The office of New York Attorney General Letitia James and the U.S. Department of Justice did not immediately respond to requests for comment.
Capping the SALT deduction affects people primarily in Democratic-leaning states, such as California and the four states that brought the case.
The cap allows individuals and married taxpayers filing jointly who itemize deductions to deduct only up to $10,000 annually for state and local income, property and sales taxes.
In February, the administration estimated that the cap would leave filers unable to deduct $323.1 billion in state and local taxes from their 2018 returns.
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