Washington – A legal confrontation between Biden Administration and Republican attorney generals with more than billions of dollars in aid to state and local governments, as the federal government prepares to implement the $ 1.9 trillion American Rescue Plan signed into law this month.
Twenty-one attorney generals issued a veiled legal threat to the Department of the Treasury – while the attorney general of Ohio has already appealed to the courts – because of restrictions linked to the $ 350 billion for state and local governments staggering with the economic consequences of the coronavirus pandemic.
According to the comprehensive package, the money given to states cannot be used for pension funds or to compensate “directly or indirectly” for tax cuts. Republican attorney generals now point to the stipulation that no money should be spent on tax cuts and warn that the condition unconstitutionally undermines their efforts to reduce taxes, even if tax cuts were planned before the Plan of Action was approved. American Rescue.
The 21 state officials sent the Treasury Department a letter last week seeking clarification on the provision, which they said could be interpreted as an attempt by the federal government to deprive states of their authority to implement tax policy.
“This language can be read to deny states the ability to cut taxes in any way – even if they had provided such a tax reduction with or without the prospect of relief funds from COVID-19,” officials wrote to the Treasury secretary, Janet Yellen, warning that, as written, the provision amounts to “an unprecedented and unconstitutional intrusion into the separate sovereignty of states.”
The letter lists more than a dozen tax cuts or credits under consideration by states that could put their aid against coronavirus at risk. With no guarantee until Tuesday that the package does not prevent states from providing tax benefits in general, attorney generals said “we will take appropriate additional measures to ensure that our states have the clarity and assurance necessary to ensure well-being. of our citizens by enacting and implementing sound fiscal policies, including tax cuts. ”
Separated from the 21 attorney general’s missive, Ohio Attorney General Dave Yost is asking a federal state court to block the application of the condition, arguing that the “coercive offer of federal funds” is unconstitutional because Congress has exceeded his authority when he approved the mandate.
Since the money is fungible, Yost told the court in an injunction request, “any money that a state receives through the law will necessarily compensate, directly or indirectly, for any tax cuts that the state may seek”.
“The tax mandate, therefore, gives states a choice: they may have the federal funds that are badly needed or their sovereign authority to define state tax policy. But they cannot have both, ”he said. “In our current economic crisis, this is not a choice. It is a metaphorical ‘weapon in the head’.”
Yost is, so far, the only attorney general who is requesting the intervention of the courts, but Ilya Somin, a law professor at George Mason University, expects others to follow, either entering the Ohio lawsuit or filing his own, unless that the Biden administration says it does not plan to enforce the provision.
For states that challenge the tax provision in the COVID-19 relief package, Somin said a strong argument they have is a lack of clarity about what states must do to receive their share of the money.
The Supreme Court said that the conditions associated with receiving federal dollars must be unambiguously established and cannot be coercive, and the higher court further clarified whether a condition is coercive in its 2012 decision, invalidating the provisions of the Accessible Care Act which required states to expand their Medicaid Programs or risk losing federal Medicaid funding.
“The biggest problem that Republican states have is that it is simply not very clear what the provision means,” he told CBS News. “It is not clear if you cut taxes in any way you will lose all the money the law would give you or just the amount you lose from tax cuts. It is also unclear what it means ‘directly or indirectly’ using the funds to compensate the revenue lost due to tax cuts. ”
The Ohio case, he said, is strong for the same reasons that the Trump administration lost legal battles over efforts to retain federal money from sanctuary cities that refused to cooperate with immigration authorities.
In cases involving the previous government, Somin said that Congress never clearly authorized the imposition of conditions on state and local governments that received the money that the Trump administration was trying to pull.
“Under Obama’s governments, republican states used the federalism argument to attack Obama’s policies. Under Trump, it was the blue states and cities that did this, and now we’re going back to the other side,” said Somin. “It is a common phenomenon, but it shows that federalism can protect states from different types of political beliefs.”
“The irony,” he continued, “is that if that fails, it may fail on some of the same basis as Trump’s effort to coerce sanctuary cities.”
Somin said he is not aware of a similar provision in a law of the same scale as the comprehensive coronavirus relief package.
At the heart of the Republicans’ challenge to prohibition is that you “can’t let Uncle Sam tell the good people in Louisiana or Texas how to manage their tax systems,” Kenneth Manning, professor of political science at the University of Massachusetts at Dartmouth, told the CBS News.
“States need the money,” he said of aid in the rescue plan. “There are a lot of collapsed schools and besieged unemployment systems, and the list is endless on what the needs are at the state level. I don’t see any big tax cuts resulting from that.”
President Biden won an important legislative victory when Congress barely passed his $ 1.9 trillion aid package, and he and his government’s top officials embarked on a national journey to publicize its benefits. Still, more details are expected from the Treasury Department on the implementation of the stimulus package.
According to the law, states must receive their federal assistance within 60 days after sending the documentation to the federal government.