In an opinion today, Judge Oetken rejected a lawsuit (covered here) by which four states, including New York, sought to invalidate the newly-enacted cap on the deduction for state and local taxes (SALT) on a filer’s federal income tax returns. The challengers argued the law “verg[es] into territory that is constitutionally reserved to the states.” But Judge Oetken found that, while the law may alter what types of state tax laws are more or less attractive—for example, it creates disincentives for high state tax rates—the law nonetheless does not improperly infringe on states’ sovereign authority to exercise their taxing powers as they wish:

The States have cited no constitutional principle that would bar Congress from exercising its otherwise plenary power to impose an income tax without a limitless SALT deduction. In the main, they rely on the notion that the Tenth Amendment preserves states’ “power to tax all property, business, and persons, within their respective limits,” Thomson v. Union Pac. R.R. Co., 76 U.S. 579, 591 (1869), and so bars “improper [federal] interference with the [s]tates’ taxing power.” Even absent an uncapped SALT deduction, though, states remain free to exercise their tax power however they wish. To be sure, the SALT cap, like any other feature of federal law, makes certain state and local policies more attractive than others as a practical matter. But the bare fact that an otherwise valid federal law necessarily affects the decisional landscape within which states must choose how to exercise their own sovereign authority hardly renders the law an unconstitutional infringement of state power.