Ohio was the first state on Wednesday to sue the administration over the US bailout plan that President Joe Biden recently adopted, claiming that the stimulus package was a “gun to the head of state” banning tax cuts.
The lawsuits filed against the Ohio Attorney General Dave Yost against the Treasury Department Centers were cited as a 1.9 trillion aid rule stating that “funds” cannot directly or indirectly use “tax revenue reductions”.
The Ohio case came after 21 Republican attorney general’s general threatened to take action in a letter Tuesday to Treasury Secretary Janet Yellen saying the detailed wording of the verdict would amount to “unprecedented and unconstitutional interference with the separate sovereignty of the states.”
“(The states) can either have federal funds or have the sovereign power over the state’s tax policy,” Yast said, arguing that the provision exceeded congressional jurisdiction. “But they can’t have both. This is not the choice in our current economic crisis. It’s a metaphor that means’ gun to the head.”
How states and cities can use direct aid allocations has emerged as one of the most important battlefields of Biden’s signature aid law signed last week.
The Biden administration envisioned direct aid for states and cities that could fill the revenue gap caused by the coronavirus epidemic and help pay for serious government work, recruit police and firefighters, and make other investments. Instead of using the federal dollar, the Democrats of Congress added a provision to the states as an incentive to further reduce tax cuts.
Treasury spokesman Alexandra Lamana declined to comment on the Ohio case, which requested an early action to prevent the new law from going into effect. He defended the ruling, saying it did not prevent states from lowering taxes, but said only epidemic relief funds could not pay the cuts.
“It is well established that Congress can create reasonable conditions for how federal funds allocated to the states should be used,” he said. “Conditions for such reasonable funding are always used – and they’re constitutional.”
Lamanna says the law does not say that “states cannot reduce taxes in any way, or that if a state reduces taxes, it must repay all federal funds provided.”
If the state decided to lower the tariffs, it instructed them not to use that money to offset their net money earnings. So, if a state drops that income without changing it in any other way, the state must pay the federal government’s epidemic relief fund up to the amount of lost revenue.
The Republican attorney general, led by officials from Georgia, Arizona, and West Virginia, wrote to Yellen, arguing that it could be interpreted as a way to stop tax expenditures altogether, including those considered prior to the American Rescue Plan, asking for clarification on the verdict. . Passage
The Attorney General pointed to a number of examples, including the inclusion of law enforcement fees for vehicle license renewals, including in Arizona; A proposal to provide tax breaks for families who adopt a child from a foster car in Georgia; And a bill under consideration to expand tax credit for Western investments in West Virginia.
“The language can be read to deny the power to cut taxes in any way, even if they have arranged such tax cuts, with or without the possibility of COVID-19 aid funds,” the letter said. “Indeed, such a federal takeover of state tax policy would represent a complete aggression towards state sovereignty by Congress in the history of our republic.”
Lawyers from Alabama, Idaho, Kentucky, Missouri, Oklahoma, Texas, Arkansas, Louisiana, Indiana, Montana, South Carolina, Utah, Florida, Kansas, Mississippi, Nebraska, South Dakota and Wyoming signed the letter.
House Republican leaders followed up with a letter Wednesday to Yellen citing “serious concerns” about the provision and seeking a formal response to a dozen questions by March 26.
Dire revenue shortages projected last year by many states during the beginning of the pandemic did not pan out. In fact, several states have revenue surpluses. While 26 states experienced a revenue decline, according to a J.P. Morgan study, 21 states saw positive revenue growth in 2020 compared with 2019.
Biden has promised “fastidious” oversight over the use of funds in the relief package. This week he tapped Gene Sperling, former director of the National Economic Council under presidents Barack Obama and Bill Clinton, to manage its implementation.
White House press secretary Jen Psaki on Monday said the original purpose of the state and local funding provision was “to keep cops, firefighters, other essential employees at work and employed, and it wasn’t intended to cut taxes.
“So I think he certainly hopes that that’s how the funding is used,” she said of the president.