Governor and AG Announce Continued Efforts to Defend SALT Deduction

Attorney General William Tong and Governor Ned Lamont announced Wednesday that Connecticut filed a petition for certiorari to the US Supreme Court to continue their lawsuit against the federal government for its unlawful and unprecedented cap on the deduction for state and local taxes, known as SALT.

The petition asks the Supreme Court to review an October 2021 ruling by the US Court of Appeals for the Second Circuit that upheld the district court’s rejection of the states’ suit, which argues that the SALT cap was a politically motivated bid by the former federal administration to interfere with the policy choices of predominantly Democratic states.

“The SALT cap was a politically motivated money grab by the previous president that continues to cost Connecticut families an estimated $2.8 billion a year,” Attorney General Tong said in a release. “We are asking the Supreme Court to hear our appeal and block this unprecedented and unlawful interference in our states’ tax decisions. I thank the Connecticut Congressional delegation for their sustained efforts to reverse this partisan tax hike.”

“The cap on state and local tax deductions that was implemented during the prior administration unfairly increased taxes on millions of middle-class Americans while cutting taxes for big corporations and the very rich,” Governor Lamont said.

“The cap hurts hardworking people in states like Connecticut and it should be overturned. I appreciate the work of Attorney General Tong and our Congressional delegation to restore the SALT deduction,” he added.

The lawsuit — originally filed in July 2018 in the US District Court for the Southern District of New York — argued that the new SALT deduction cap was enacted to target Connecticut and similarly situated states and interferes with states’ rights to make their own fiscal decisions, and will disproportionately harm taxpayers in these states.

The top states with the highest average deduction for state and local taxes — a majority of which are Democratic — include New York, Connecticut, Maryland and New Jersey.

The 2017 Tax Act reversed over a century of precedent in the federal tax code — drastically curtailing the state and local tax deduction by capping it at $10,000. An analysis by the Connecticut Dept of Revenue Services found that the cap increased Connecticut federal taxes in 2018 by $2.8 billion.

In its September 2019 ruling, despite ruling against the coalition of states, the U.S. District Court for the Southern District of New York agreed that the states had been injured based on their argument that the cap on the state and local tax deduction may depress home prices. By effectively raising state property taxes, the SALT cap will also reduce the value of a homeowner’s property, thereby discouraging home sales and decreasing the revenues the states are able to collect by taxing such sales.

Connecticut joins New York, Maryland, and New Jersey in filing today’s petition.