Ohio Attorney General Dave Yost sued that the Biden government Wednesday within a last-minute supply in the $1.9 trillion Covid-19 economic relief plan which prevents countries from using it to finance tax cuts, starting the first major legal fight against the stimulation package since it passed a week without Republican support.
Senate Democrats added the provision to the American Rescue Plan in a bid to ensure the $350 billion put aside for states would be used to finance cash-strapped governments that have been hurt from the coronavirus pandemic, rather than to subsidize tax cuts.
In a harshly worded letter to the Treasury Department late Tuesday, 21 Republican state attorneys general known as the tax provision”unprecedented and unconstitutional.”
The Republican attorneys general from Arizona, Georgia, Texas, West Virginia and 17 other nations demanded caution that legislatures could still pursue tax cut plans, some of which were already underway, and pledged to take”appropriate additional action” if not.
“The federal government should be encouraging states to innovate and grow business, not holding vital relief funding hostage to its preferred pro-tax policies,” Yost said in a statement.
Biden signed the American Rescue Plan into law Friday after Democrats last month used a budgetary maneuver to skip Republican support on the bundle, which also contained direct payments to a Americans, additional unemployment benefits and expanded child tax credits. Congressional Republicans have sought to undermine the laws, which they voted against despite overwhelming public support on either side of the aisle. Along with the taxation provision, congressional Republicans have argued against the price of the American Rescue Plan and cautioned it could lead to detrimental levels of inflation.
In an announcement to Forbes, Treasury Department spokesperson Alexandra LaManna said if a country does reduce taxation without replacing this revenue in another way, it has to pay back into the federal government pandemic relief capital up to the sum of the lost revenue. Countries are free to make policy choices to cut taxes — they just cannot use the pandemic relief funds to cover those tax cuts,” LaManna said. The White House press office did not immediately respond to a request for comment.
In an interview with CBS on Sunday, Gov. Asa Hutchinson, (R-Ark.) , expressed concerns that the bill would interfere with plans to reduce sales taxes on used cars. “And now we are worried about if that is going to be prohibited under this bill,” she said. The language seems to indicate it is. So, while there’s many good things about it, it is too large and we’ve got to make sure the states have flexibility.”