13 States File Lawsuit Against Biden Admin Demanding Ability To Cut Taxes With Rescue Plan

Written by Martin Walsh

OPINION: This article contains commentary which reflects the author's opinion

Thirteen states have filed a lawsuit against Joe Biden and his administration over the tax section of the American Rescue Plan.

They are objecting to the clause that prohibits states from cutting taxes after getting coronavirus relief funds.

The coalition is led by Republican West Virginia Attorney General Patrick Morrisey. The other states in the lawsuit are Alabama, Arkansas, Alaska, Florida, Iowa, Kansas, Montana, New Hampshire, Oklahoma, South Carolina, South Dakota, and Utah.”

Morrisey issued a statement that read: “West Virginia Attorney General Patrick Morrisey, Alabama Attorney General Steve Marshall, and Arkansas Attorney General Leslie Rutledge led a 13-state, bipartisan coalition in filing suit Wednesday to protect the well-established authority of states to lower taxes for their citizens.

The lawsuit argues federal treasury officials cannot force states to relinquish control of their taxing authority in return for much-needed economic aid related to COVID-19.

The states take specific issues with a provision in the stimulus bill that the coalition refers to as one of the most egregious power grabs by the federal government in the nation’s history.

“Never before has the federal government attempted such a complete takeover of state finances,” Attorney General Morrisey said.

“We cannot stand for such overreach. The Constitution envisions co-sovereign states, not a federal government that forces state legislatures to forfeit one of their core constitutional functions in exchange for a large check equal to approximately 25 percent of their annual respective general budgets,” Morrisey added.

The attorneys general argue that the mandate could be used to claw back a share of a state’s stimulus allotment, the Daily Caller reported.

This creates an impermissible chilling effect on state lawmakers’ willingness to reduce the tax burdens on their citizens.

Members of the coalition sought to avoid litigation by asking U.S. Treasury Secretary Janet Yellen to confirm the legislation would not strip states of their taxing authority.

However, the lawsuit argues her response did not place limits on the vague provision – uncertainty that she admits exists in referring to the ambiguity as a “thorny” issue in testimony to Congress.

For instance, the lawsuit points out that uncertainty remains in West Virginia as to whether potential changes to a sales tax exemption on aircraft repair and maintenance or an extension of the state’s Neighborhood Investment Tax Credit would violate the federal tax mandate.

The attorney generals filed the lawsuit against the U.S. Department of Treasury, Secretary Yellen, and the department’s Acting Inspector General Richard K. Delmar, who would be responsible for seeking any potential clawback of federal funds.

In particular, the AGs have warned that one provision of the law that prohibits states from lowering taxes is “the greatest attempted invasion of state sovereignty by Congress in the history of our Republic.”

Here’s the main issue: The restriction, which was added at the last minute by Senate Democrats, is designed to ensure that states use the money to keep their local economies afloat, including avoiding massive budget cuts and job losses, rather than subsidize tax cuts.

In other words, poorly run states can use the money to pay off their careless spending rather than actually use it to provide relief to those in need.

“This 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,” the AGs wrote.