Connecticut Joins Lawsuit Over Republican Tax Overhaul

July 17--Connecticut is joining New York and two other states in a lawsuit challenging the sweeping federal tax law passed by Republicans in Congress last year.

The states are specifically focusing on the $10,000 per couple cap on state and local tax deductions, which disproportionately affects homeowners in high-tax states. Many Fairfield County homeowners pay more than $10,000 in real estate taxes alone.

The lawsuit was filed in federal court in New York on Tuesday.

In January, Gov. Dannel P. Malloy and two other Democratic governors called for the multi-state lawsuit against the federal tax code revisions, saying the law is unfair to 12 states due to new limits on deductions for state income and property taxes.

While many Connecticut taxpayers do not itemize their federal deductions, the average overall in 2015 was $19,664, according to the legislature's nonpartisan research office. Among those earning more than $1 million per year, the SALT deductions are among the highest in the nation at nearly $330,000. If there are no changes in the tax law, officials say that the average taxpayer will be paying $3,846 more in federal taxes in 2018.

Connecticut was tied with New Jersey in 2015 for the second-highest percentage of taxpayers claiming the SALT deduction -- at 41 percent of federal tax returns.

"Perhaps most concerning, this law discriminates against Connecticut taxpayers, who stand to lose over 10 billion dollars in state and local tax deductions," Malloy said Tuesday. "Hundreds of thousands of residents could see a tax increase even as their property values decrease. I am proud to stand with my colleagues across the country in fighting against the discriminatory impacts of this shortsighted and damaging Republican law on our states."

Malloy, joined by New York Gov. Andrew Cuomo and New Jersey Gov. Phil Murphy, said in a conference call at the time with reporters that the federal lawsuit was being prepared that will seek to include other states. All 12 states voted in favor of Democrat Hillary Clinton over Republican Donald Trump in the 2016 presidential election, Cuomo said.

The governors argued that the $10,000 limit on state and local tax deductions is too low for affluent, high-tax areas like lower Fairfield County, Westchester County and Long Island. They have also argued that the limits could hurt the real estate market in those areas. Traditionally, there has been no limit to the property tax deduction, but there have been limits on overall deductions for the wealthiest taxpayers.

Cuomo argued that the new law "is purely double taxation" and that there is "a very strong argument that it's unconstitutional."

The limit for married taxpayers who file separately is $5,000, under the law.

Some candidates believe the Connecticut Congressional delegation should change the law, but that is unlikely in the short term because Republicans control the U.S. House, U.S. Senate and the Oval Office.

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