Maryland Attorney General Joins Lawsuit Challenging Republican Federal Tax Reform Bill

Maryland Attorney General Joins Lawsuit Challenging Republican Federal Tax Reform Bill

Brian Frosh says cut to state and local tax deduction unfairly targeted Maryland and other Democratic-leaning states; nearly 277,000 Montgomery households claimed deduction

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Hundreds of Montgomery County property owners lined up in December to pre-pay their 2018 tax bills after Congress passed a cap on the State and Local Tax deduction.
BETHESDA BEAT FILE PHOTO

Maryland residents salty about the loss of a popular tax deduction could get some relief. Maryland Attorney General Brian Frosh (D) joined the states of Connecticut, New Jersey and New York in suing the Trump administration, alleging that a new cap on the State and Local Tax (SALT) deduction will disproportionately harm taxpayers in those states.

In Montgomery County, 266,400 households claimed a SALT deduction in 2015, with the average deduction of $18,247, according to the National Association of Counties.

The Tax Cuts and Jobs Act of 2017 passed by Republicans in Congress last year limits the deduction to $10,000, meaning Marylanders who pay more than that in state and local taxes could see their tax bills go up.

The lawsuit argues the new SALT cap was enacted to target Maryland and the other states and that the states will be disproportionately harmed fiscally.

More than 500,000 Marylanders will lose $6.5 billion in SALT deductions—an average of $11,800 per taxpayer, Frosh said, citing an analysis earlier this year from the Maryland comptroller’s office.

“Eliminating the SALT deduction will jack up taxes for more than half a million Marylanders,” Frosh said in a written statement. “It is an attack on state sovereignty. It will reduce funding for local law enforcement and for construction of infrastructure statewide, and it will cripple our ability to educate our kids.”

When the federal tax reform bill was signed by President Donald Trump late last year, the Montgomery County Council passed emergency legislation to allow property owners to pre-pay their 2018 property tax bills in an effort to deduct the payments a year early.

County residents deducted a total of $4.68 billion through the SALT deduction in 2015, according to the counties association, which urged members to preserve the SALT deduction to “prevent double taxation.”

Frosh’s office said the cap on deductions is unconstitutional and “flies in the face of centuries of precedent” in tax law, which has always provided a deduction for all or a significant portion of state and local taxes. The new cap will raise federal tax dollars from residents in states with higher local taxes and violates the constitutional principle of equal state sovereignty by targeting some states for unfavorable treatment, the lawsuit alleges.

The complaint includes quotes from Republican lawmakers and officials who expressed motivation to change state tax policies through the federal tax bill, particularly in Democratic-leaning states.

Among the quotes included were those from Treasury Secretary Steve Mnuchin, who said the change was intended to “send a message” to states to get them to change their fiscal policies, and Stephen Moore, a Trump campaign adviser who called the SALT changes “Death to Democrats.”

The lawsuit was filed Tuesday in the U.S. District Court for the Southern District of New York, led by New York Attorney General Barbara Underwood (D).

Danielle E. Gaines can be reached at danielle.gaines@bethesdamagazine.com. 

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