Some blue states are threatening to sue and get the cap placed on the SALT exemption ruled unconstitutional. The obvious problem with these arguments is that there’s no constitutional prohibition against policies that affect different states differently or “double taxation”:
While the equal protection clause of the 14th Amendment applies to the treatment of individuals, not states, in the 2013 case Shelby County v. Holder – which ruled a crucial section of the Voting Rights Act of 1965 unconstitutional – the Supreme Court found an implicit principle of state equal sovereignty, or the idea that each state joined the country on equal footing as each other state. But in that case, the relevant section of the Voting Rights Act applied to some states and not others. The Republican tax law will be applied identically in all 50 states. It’s true that the law has a different impact in some states rather than others, but this is true of most of the U.S. Code. After all, the unlimited SALT exemption also impacts some states differently – which is why Cuomo supports it – but that doesn’t make it unconstitutional. “I don’t understand how capping SALT is much different than funding formulas for Medicaid or Medicare that differentiate between low-density and high-density population regions,” said Leah Litman, a law professor at the University of California, Irvine and author of an article about the Shelby County case in the Michigan Law Review.
As Litman wrote, there’s another reason for liberals to resist using Shelby County to attack the capping of the SALT deduction: It’s a hopelessly incoherent holding with no clear basis in the text of the Constitution or in the precedents of the Supreme Court, which puts it among the worst decisions in the court’s history. As the recently retired federal judge and conservative legal scholar Richard Posner said, “There is no doctrine of equal sovereignty. The opinion rests on air.” Reifying this novel doctrine, which was invented by the court’s conservative majority to empower Republican-leaning states to make it more difficult for racial minorities to vote, will harm liberal ends more than it will help them. For example, it could be used to stop efforts by a Democratic Congress to strengthen the Voting Rights Act. Liberals should not legitimize this weak and dangerous argument as part of what will be an almost certainly futile quest to win a relatively minor battle.
The challenges to the SALT cap may also invoke Comptroller v. Wynne, a 2015 case that did not allow residents of Maryland to fully deduct the income tax they paid in other states. Some observers have described this holding as a prohibition against “double taxation.” But Wynne’s holding is not obviously applicable here: Maryland’s tax was held to violate the so-called “dormant Commerce Clause,” which forbids state regulations and taxes that interfere with the federal power to regulate interstate commerce. This doctrine prohibits states from discriminating against other states in their economic regulations. But this holding isn’t relevant to a federal law. Indeed, Congress can permit states to enact laws that would otherwise violate the dormant Commerce Clause, so it would be odd to see this case as limiting federal power. There is no constitutional principle against “double taxation” per se. And this is a good thing, because this dubious concept is also frequently invoked by conservatives to oppose progressive taxes like the capital gains tax.
And then there’s the final resort of all dubious “states’ rights” arguments, the 10th Amendment, which reserves all powers not delegated to the federal government to the states or the people. But as former Supreme Court Justice Harlan Fiske Stone wrote, “The amendment states but a truism that all is retained which has not been surrendered.” It’s only relevant to cases where the federal government is acting outside its delegated powers. But the tax power is unquestionably a valid federal power, and nothing in any provision of the Constitution requires the federal government to deduct state and local taxes.
It’s understandable that a lot of taxpayers in states like New York don’t like this policy change, but the appropriate remedy is at the ballot box. Progressives should resist the temptation to invoke specious constitutional arguments that have historically been the source of some of the Supreme Court’s worst decisions.
I’m inclined to think that the cap on the SALT deduction is one of the few provisions of the No Billionaire Left Behind Act that is an improvement on the status quo. But irrespective of the policy merits, it’s unquestionably constitutional.