States Are Suing For Their SALT Deductions Back Under The 16th Amendment

#AllAmendmentsMatter

Actually, Jesus said, ‘Render unto Caesar the things that are Caesar’s.’ But it’s a good picture. (Photo by Alex Ogle/AFP/Getty Images)

The Republican tax bill famously capped the deductions for state and local taxes (SALT) at $10,000 for the purposes of federally taxed income.

The move, orchestrated by Republicans from low-tax, low-population states, represented a flashpoint in our growing system of political apartheid. It was an attack on high-tax “blue” states that provide services to their people, by flyover country that has gotten used to living without Medicare or education.

The blue states are fighting back, such as they can. A lawsuit was filed by New York Governor (for now) Andrew Cuomo against the federal government, joined by Connecticut, Maryland, and New Jersey. They argue that the Republican tax bill interferes with state’s rights to make their own fiscal decisions.

I’m going to dispense with the “states’ rights” arguments because… well, because I’m black and I don’t like making the arguments of slavers. There’s plenty of literature out there if you are interested.

But the states also argue that federal government is violating the original meaning of the Sixteenth Amendment… and I am all here for that. Blue states are making an originalist argument about the 16th Amendment and that is goddamn fascinating!

From the complaint:

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36. Recognizing this structural limitation on its power to tax, the federal government has always respected the sovereign tax authority of the States by providing a deduction for all or a substantial portion of state and local taxes as part of the federal income tax. Indeed, since the federal government first exercised its income tax power in 1861, Congress has included such a deduction in every federal income tax law. Relying on this constitutional guarantee and uninterrupted practice, the States have structured their own state tax regimes around the federal SALT deduction.

37. The ratification history of the Sixteenth Amendment provides further confirmation that a deduction for all or a significant portion of state and local taxes is constitutionally required. When the States ratified the Sixteenth Amendment, they confirmed the historic limitations on the federal government’s income tax power. At the time of the amendment’s ratification, it was widely understood that, to the extent the federal government taxed income, it would provide a deduction for all or a significant portion of state and local taxes. The States—including the Plaintiff States— relied upon this understanding in making the decision to ratify the Sixteenth Amendment.

This is the kind of issue that should illuminate the differences between so-called “originalists” versus “textualists.” Clearly, there’s nothing in the text of the 16th Amendment that requires the federal government to respect the SALT deduction. But if you look at the original understanding of the Amendment…

60. These public declarations about the meaning of the Sixteenth Amendment also provide insight into how Congress’s income tax power under the Sixteenth Amendment should be construed. See, e.g., New York v. United States, 505 U.S. 144, 163-66 (1992).

61. The drafters and defenders of the Sixteenth Amendment intended for the federal government’s income tax powers to be constrained by the need to accommodate the States’ sovereign tax authority.

62. When Congress first exercised its income tax power after the amendment’s ratification in 1913, Congress respected the federalism constraints promised by the amendment’s champions. Similar to prior federal income tax statutes, the first post-amendment federal income tax law—the Revenue Act of 1913—included a deduction for “all national, State, county, school, and municipal taxes paid within the year.”40

63. Under Supreme Court precedent, “[e]arly congressional enactments” of this nature “provide contemporaneous and weighty evidence of the Constitution’s meaning.” Printz, 521 U.S. at 905 (alteration and quotation marks omitted). As relevant here, the 1913 Revenue Act’s SALT deduction establishes that Congress understood that its newly minted power to impose a federal tax on incomes was subject to the same federalism limitations that had applied to every federal tax statute since the Founding.

Of course, “originalism” isn’t really an honest attempt to interpret Constitutional issues, it’s a cynical attempt to promote the polices of the Republican party. Right now, the policy of the Republican party is to napalm the SALT deduction.

I expect judges picked by the Federalist Society and the Heritage Foundation to dance with the party that brought them. “Federalism” concerns or evidence of original intent mean nothing to these people when there is a preferred Republican policy up for review.

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Still, New York Attorney General Barbara Underwood is making a great argument here. Even if she loses, she’s sure going to make conservative judges show themselves to be inveterate hypocrites.

Who knew the 16th Amendment could be so illuminating?

New York sues federal government over tax law [Albany Times-Union]
NY v. Mnuchin [Reuters]


Elie Mystal is the Executive Editor of Above the Law and the Legal Editor for More Perfect. He can be reached @ElieNYC on Twitter, or at elie@abovethelaw.com. He will resist.