A federal judge dismissed a lawsuit from several states Monday that sought to void the Trump administration’s cap on a tax break for people filing in high-tax states.
In a win for the president, U.S. District Judge Paul Oetken in New York said that Maryland, New Jersey, Connecticut and New York failed to show that the cap of $10,000 on federal deductions for state and local taxes exceeded Congress’ constitutional power to impose income taxes. The cap was implemented as part of President Donald Trump’s 2017 tax overhaul.
Oetken ruled that there was no basis for the claim that the cap was an effort to force states to lower their taxes.
The states failed to show that the cap “puts them to the forced choice of lowering tax rates or facing budgetary catastrophe,” Oetken wrote, Reuters reported.
The lawsuit was filed by the states in 2018, alleging that the limit was a way for the administration to punish Democratic-leaning states. The Tax Cuts and Jobs Act limited the state and local tax deductions at $10,000, an amount below the average of what people claim in states like the ones suing.
The limit allows individuals and married taxpayers filing together who itemize deductions to deduct only up to $10,000 a year for state and local income, property and sales taxes. Married people filing separately have a limit of $5,000 each.
Trump used the cap to help pay for other parts of the $1.5 trillion overhaul, which included reducing taxes for wealthy Americans and cutting the corporate tax rate.