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The U.S. Supreme Court on Monday declined to hear a constitutional challenge brought by New Jersey and three other states where taxpayers have been disproportionately hurt by the $10,000 cap placed on the federal income tax deduction for state and local taxes (SALT) already paid.

New York, New Jersey, Connecticut, and Maryland were seeking to overturn the SALT cap, instituted as part of the 2017 Tax Cuts & Jobs Act, because it hurts taxpayers in their states who pay high income taxes and property taxes, which are now no longer fully deductible on federal income tax returns.

The justices on Monday declined without comment to hear an appeal in New York, et. al., v. Yellen, effectively letting stand a lower court decision that had rejected the challenge brought by the four Northeast states. The 2nd U.S. Circuit Court of Appeals said in its 2021 decision that there was nothing in the text of the U.S. Constitution or its amendments that specifically mandates a full SALT deduction.

The appellate court also rejected the plaintiffs’ claim that the SALT cap infringed on state sovereignty by attempting to coerce states to reduce taxes and services.

The US Supreme Court order denying the plaintiffs’ petition, effectively leaving the cap in place, means high-tax states will have to look to Congress to obtain relief from the SALT cap. Several congressional Democrats have already said they will not vote for the White House’s $5.8 trillion federal budget plan unless it raises the SALT deduction cap.

New Jersey taxpayers have the highest property taxes in the nation, and its top income tax rate of 10.75% is also among the highest in the United States. Before the 2017 tax reform law took effect the average SALT deduction for New Jersey taxpayers was $19,000. By 2018, the average SALT deduction in New Jersey had dropped to $9,700.

Earlier this year, the governor signed into law the “Pass-through Business Alternative Income Tax,” which was supported by NJBIA because it gave thousands of small businesses registered as S-Corps and LLCs a workaround that enables them to fully deduct their state income taxes on federal returns.

The law amended New Jersey’s state tax code to a similar system that was in place prior to 1993 under which S corporations, LLCs and other business partnerships directly paid the state income tax liability of their owners and partners.