Utah among 13 states suing Biden administration over COVID-19 relief ban on tax cuts
Attorneys general from 13 mostly Republican states, including Utah, sued President Joe Biden’s administration on Wednesday over a rule in the federal stimulus that prohibits states from using coronavirus relief money to offset tax cuts.
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The lawsuit filed in U.S. District Court in Alabama seeks to strike down the provision in the massive relief package signed by Biden that bars states from using $195 billion of federal aid “to either directly or indirectly offset a reduction” in net tax revenue. The restriction could apply through 2024.
The coalition, which includes one Democratic attorney general, is concerned the provision can construe any tax cut as taking advantage of the pandemic relief funds, according to the Associated Press.
Utah Attorney Sean Reyes was among a group of 21 GOP attorneys general who earlier sent a letter to Treasury Secretary Janet Yellen threatening to take legal action against the Biden administration if it didn’t clarify the provision.
“The Utah Legislature recently passed $100 million in tax relief to families with children, veterans and older residents receiving Social Security,” Reyes said in a statement in mid-March. “But that relief is now at risk because the American Rescue Plan Act potentially denies states the ability to cut taxes.”
The Treasury Department at the time said the provision isn’t meant as a blanket prohibition on tax cuts, the AP reported. States can still offset tax reductions through other means.
“Nothing in the Act prevents states from enacting a broad variety of tax cuts,” Yellen wrote in response to the letter. “It simply provides that funding received under the act may not be used to offset a reduction in net tax revenue resulting from certain changes in state law.”
But West Virginia Attorney General Patrick Morrisey, who co-led the lawsuit with his colleagues from Alabama and Arkansas, argues the interpretation of the word “indirectly” in the provision could come back to haunt states that cut taxes.
“This ensures our citizens aren’t stuck with an unforeseen bill from the feds years from now,” he said in a statement.
Alabama Republican Attorney General Steve Marshall said the “federal tax mandate is an unprecedented and unconstitutional assault on state sovereignty.”