Cuomo’s Claim that capping SALT deductions is unconstitutional is wrong

Cuomo’s Claim that capping SALT deductions is unconstitutional is wrong

This post first appeared in The Hill on January 30, 2018.

Some leading proponents of centralized federal power have caught that ole-time states’-rights religion.

New York Governor Andrew Cuomo, for example, has been a fervid defender of ObamaCare and other congressional programs invading traditional areas of state control. But, he says, Congress violated the rules of federalism when its new tax law capped income tax deductions for state and local taxes paid (SALT deductions).

Are Cuomo and his allies correct? Does the Constitution require Congress to include SALT deductions in its income tax laws?

The Constitution’s actual language does not say so.

Some cite a 1985 speech by the late Senator Daniel Patrick Moynihan (D.-N.Y). arguing for the SALT deduction. But that particular speech is cast in generalities, and does little to address specific constitutional questions.

They also point to Controller v. Wynn, a 2015 case in which the Supreme Court struck down a Maryland law taxing out-of-state income. But that case centered on interstate commerce issues not present in the new tax law.

Still others contend that the original Constitution banned income taxes until the Sixteenth Amendment approved them, and that amendment would not have been approved unless it implicitly required SALT deductions. For several different reasons, however, this argument is extraordinarily weak.

First, its initial premise is wrong: The original Constitution did not ban income taxes. On the contrary, it granted Congress broad authority to impose “direct taxes,” including income taxes. The only restriction was that if Congress imposed a direct tax it had to divide the expected revenues among the states by population. The Sixteenth Amendment eliminated that restriction, but Congress always had enjoyed power to impose an income tax.

Second, cited evidence for the founders’ supposed anti-income tax view actually cuts in the opposite direction. According to one Cuomo ally, “It was feared that the new federal income tax would ‘monopolize’ all of the country’s resources, leaving little money left in state coffers … Alexander Hamilton outlined this precise fear as early as the 1780s, in Federalist Paper No. 31.”

What the writer fails to mention is this fear arose chiefly among the Constitution’s opponents, and that Hamilton “outlined” it only to rebut it. Specifically, Hamilton pointed out that the Constitution tasked the federal government with national defense and internal order—and that because it was impossible to predict how much revenue would be needed for such functions, additional limits would be unworkable.

For better or worse, most of the founders agreed with Hamilton. They repelled efforts to further curtail Congress’s taxing authority.

Finally, there is little basis to the claim that, “the 16th Amendment likely would not have been ratified without SALT deductions in mind.”

When constitutional language is unclear or exact definitions uncertain, courts may clarify the terms by examining common practices and representations considered part of the “ratification bargain.” But the presence of SALT deductions in short-lived tax bills in 1862 or 1894 tells us little about how the ratifiers understood the Sixteenth Amendment decades later. Moreover, on those rare occasions when legislatures or conventions ratify an unclear measure on the basis of particular meanings, they can say so — which, in the case of the Sixteenth Amendment, they apparently did not.

More importantly, the Sixteenth Amendment is not ambiguous or uncertain. It is straightforward and clear: “The Congress shall have power to lay and collect taxes on incomes, from whatever source derived, without apportionment among the several States, and without regard to any census or enumeration.”

Where in this amendment, pray tell, lurks any mandatory SALT deduction?

Opponents of the new tax law are right to be concerned about federal overreaching, but they are barking up the wrong tree. They are inventing a fictional limit on federal authority while ignoring real ones.

For example, when drafting the Affordable Care Act Congress permitted the Senate to insert economic regulations in a tax bill, thereby violating an explicit constitutional rule called the Origination Clause. That violation has not induced Cuomo and his allies to withhold their support. They also have failed to object when Congress ignores other constitutional limits on its powers.

Governor Cuomo and his allies should honor the Constitution’s real restrictions on federal power. When arguing constitutional questions, however, they should not invent non-existent ones.

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