Republican attorneys general from 21 states are threatening to sue the Biden administration over a provision in the $1.9 trillion coronavirus stimulus package that they say prohibits them from using the funds to offset tax cuts.
In a seven-page letter sent to Treasury Secretary Janet Yellen on Monday, the attorneys general ask her to assure them that ”certain provisions of the American Rescue Plan Act do not attempt to strip States of their core sovereign authority to enact and implement basic tax policy.”
They say the prohibition is “unclear, but potentially breathtaking” and prevents them from using any of the $350 billion being distributed to state and local governments “to either directly or indirectly offset a reduction in the net tax revenue.”
The Republicans, led by the attorneys general of Arizona, Georgia and West Virginia, said the “language” could be read to “deny States the ability to cut taxes in any manner whatsoever — even if they would have provided such tax relief with or without the prospect of COVID-19 relief funds.”
”Absent a more sensible interpretation from your department, this provision would amount to an unprecedented and unconstitutional intrusion on the separate sovereignty of the States,” the letter said.
They asked Yellen to get back to them to confirm that the American Rescue Plan doesn’t forbid states from providing tax relief.
“In the absence of such an assurance by March 23, we will take appropriate additional action to ensure that our States have the clarity and assurance necessary to provide for our citizens’ welfare through enacting and implementing sensible tax policies, including tax relief,” the missive said.
Asked about states wanting to use the stimulus funds to balance out tax cuts, White House press secretary Jen Psaki said that’s not the way the money was intended to be used.
“The original purpose of the state and local funding was to keep cops, firefighters, other essential employees at work and employed, and it wasn’t intended to cut taxes. So I think [President Biden] certainly hopes that that’s how the funding is used,” she said at Monday’s briefing.
Three GOP senators on Tuesday introduced legislation that would eliminate the provision.
“If a state like Idaho wants to provide tax relief in the interest of economic recovery, and to help people return to earning their livelihoods, the American Rescue Plan says it will be financially punished by the federal government,” Sen. Mike Crapo (R-Idaho) said in a statement.
With Post wires