Give Us Tax Cuts Or We’ll Take Stimulus To Court, GOP AGs Demand

on December 13, 2017 in Washington, DC.
WASHINGTON, DC - DECEMBER 13: Federal Reserve Chair Janet Yellen listens during her last news conference in office December 13, 2017 in Washington, DC. Yellen announced that the Federal Reserve is raising the intere... WASHINGTON, DC - DECEMBER 13: Federal Reserve Chair Janet Yellen listens during her last news conference in office December 13, 2017 in Washington, DC. Yellen announced that the Federal Reserve is raising the interest rates by a quarter point to 1.5%. (Photo by Alex Wong/Getty Images) MORE LESS
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March 17, 2021 10:17 a.m.
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Republican state attorneys general are claiming that a bid to prevent the states from using the $1.9 trillion Biden stimulus package to finance tax cuts constitutes “the greatest attempted invasion of state sovereignty by Congress in the history of our Republic.”

A group of twenty one Republican state attorneys general sent a letter to Treasury Secretary Janet Yellen on Tuesday, demanding that she refuse to implement a provision in the American Rescue Plan which prohibits states from using $350 billion in stimulus on financing tax cuts.

It’s among the first salvos in what is likely to be a long war of Republican state attorneys general against the Biden administration and its policy agenda. In this case, the AGs are threatening to sue should Yellen decline to specify that the states can proceed with tax cut measures outlined in the seven-page document.

The language of the letter is riven with threats and ultimatums. At the end of the message, the attorneys general give Yellen a deadline: if she does not provide an “assurance” that the states can continue with plans for tax cuts, they “will take appropriate additional action to ensure that our States have the clarity and assurance necessary to provide for our citizens’ welfare through enacting and implementing sensible tax policies, including tax relief.”

Congress added the provision during negotiations over the $1.9 billion stimulus package this month as multiple state legislatures indicated that they would use the aid for pandemic-stricken states and cities to finance massive tax cuts.

The money comes as states and cities around the country continue to contemplate steep cuts to public services absent an influx of cash, as the pandemic dealt a huge hit to the economy. The stimulus legislation aims at ensuring that federal money is used to patch these budget holes instead of financing tax cuts.

The implementation of the law, and the resolution of questions like the fate of pre-existing tax cuts, will be up to the Treasury Department, which has yet to issue any rules on the provision.

Georgia passed a $140 million tax cut that’s mentioned in the letter, for example.

After the Senate passed a version of the stimulus bill with language preventing the money from being used to finance tax cuts, the speaker of the Georgia house sent a letter to President Biden beseeching him to “prevail upon Congress to have this flaw in the legislation corrected before signing it into law.”

The state attorneys general said in the letter that Yellen would face a lawsuit should the states not be allowed to use the federal funds to finance their tax cuts.

“Absent a more sensible interpretation from your department, this provision would amount to an unprecedented and unconstitutional intrusion on the separate sovereignty of the States through federal usurpation,” the missive reads.

The law itself stipulates that for the period when states have access to the stimulus funds — from now until 2024 — they cannot use the money to “offset” tax cuts.

Read the letter here:

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