Biden Administration loses to 13 states who want to use COVID-19 relief to give tax cuts to residents

Several states were successful in their case against the Biden administration that would have limited the way they used federal funds allocated to their states. 

According to The Washington Examiner the states took exception to President Joe Biden’s COVID-19 relief bill having stipulations as to how they could use the money, specifically regarding state tax cuts.

The Group of Republican-led states filed suit, saying that the terms were unconstitutional and that states should be allowed to pass along that relief to their citizens in the form of tax cuts if they so desire.

“U.S. District Judge L. Scott Coogler of the Northern District of Alabama issued an injunction against Treasury Secretary Janet Yellen and in favor of more than a dozen states that enjoins her from enforcing the section of Biden’s $1.9 trillion American Rescue Plan Act, enacted in March,” the Examiner reported.

The suit outlined a plan by several states which included using COVID-19 funding to fill the gap that would be created by lowering state taxes or offering tax credits.

According to the attorney generals of the states involved, said that the money came with unknown strings, specifically that they wouldn’t be allowed to “directly or indirectly” use the federal money to cut taxes.

The states argued that this was a Constitutional spending clause violation due to the 10th amendment.

According to Coogler’s opinion in the plaintiffs’ argument that “the language of the Tax Mandate makes it impossible for States to ‘make an informed choice’ about the costs of receiving ARPA funds because it is impossible to know how to exercise taxing authority without putting ARPA funds at risk.”

The judge also pointed to the fact that the money was “fungible,” which means in essence, it is an interchangeable asset which, according to the tax mandates, would make it reasonable to be used for tax cut offsets.

“Thus, any ARPA funds the Plaintiff States receive could be viewed as indirectly offsetting any reduction in net tax revenue from a change in state law or policy,” Coogler said.

“After all, a decrease in one part of a State’s revenue is necessarily offset somehow to achieve a balanced budget. Thus, there is no way for the Plaintiff States to ‘clearly understand the[ir] obligations’ if they accept ARPA funds.”

The 13 states successful in this suit were: West Virginia, Alabama, Arkansas, Alaska, Florida, Iowa, Kansas, Montana, New Hampshire, Oklahoma, South Carolina, South Dakota, and Utah.

Conservatives celebrated this win, including Iowa Gov. Kim Reynolds who said that “This is a major victory for the State of Iowa and Iowa taxpayers,” in his statement.

“The Biden Administration was trying to punish fiscally responsible states like Iowa, which has a record budget surplus, and that’s why we took legal action. With this ruling, Biden’s Administration can’t keep us from cutting taxes and I look forward to doing just that.”

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