Washington – A legal confrontation between the Biden Administration and Republican attorneys general on billions of dollars in aid to state and local governments is approaching as the federal government prepares to implement the $ 1.9 trillion U.S. bailout plan signed into law this month.
Twenty-one attorneys general have issued a veiled legal threat to the Treasury Department, while the Attorney General of Ohio has already gone to court, for chains linked to the $ 350 billion for deviating state and local governments of the economic consequences of the Coronavirus pandemic.
According to the global package, money donated to states cannot be used for pension funds or to offset “directly or indirectly” tax cuts. Now, Republican attorneys general point to the forecast that no money will be spent on tax cuts and warn that the condition unconstitutionally hinders their efforts to cut taxes, even if tax cuts had been planned earlier. of the approval of the American rescue plan.
The 21 state officials sent a letter to the Treasury Department last week asking for clarification on the provision, which they said could be interpreted as the federal government trying to deprive states of its authority to implement fiscal policy.
“This language could be read to deny states the possibility of reducing taxes in any way, even if they had provided this tax cut with or without the possibility of having COVID-19 relief funds,” officials wrote in Treasury Secretary Janet Yellen, warning that, as it was written, the provision amounts to “an unprecedented and unconstitutional interference in the independent sovereignty of states.”
The letter lists more than a dozen tax cuts or credits that states believe could put their coronavirus aid at risk. Until Tuesday it is not ensured that the package does not prevent states from providing a general tax cut, Attorneys General said that “we will take appropriate additional measures to ensure that our states have the clarity and assurance necessary to provide the welfare of our citizens through the enactment and implementation of sound fiscal policies, including tax cuts. ”
Aside from the letter from the 21 Attorney Generals, Ohio Attorney General Dave Yost is asking a state federal court to block the application of the condition, arguing that “the coercive supply of federal funds” is unconstitutional because Congress exceeded its authority when it approved the mandate.
Because the money is expendable, Yost told the court in a preliminary injunction request, “all money that a state receives through the act will necessarily offset, directly or indirectly, all tax reductions that the state can chase “.
“The tax mandate therefore gives states an option: they can have the much-needed federal funds or their sovereign authority to establish state tax policy. But they can’t have both,” he said. “In our current economic crisis, this is no other option. It is a ‘metaphorical’ weapon in the head.”
Yost is so far the only attorney general to request court intervention, but Ilya Somin, a law professor at George Mason University, expects others to do so by joining the Ohio lawsuit or filing her own, at unless the Biden administration says it has no plans to enforce the provision.
For states challenging the tax provision of the COVID-19 relief package, Somin said a strong argument they have is the lack of clarity about what states must do to receive their share of the money.
The Supreme Court has said conditions relating to the receipt of federal dollars must be established unambiguously and cannot be coercive, and the high court clarified whether a condition is coercive in its 2012 decision invalidating the provisions of the Affordable Care Act that required states to expand their Medicaid Programs or risk losing federal Medicaid funding.
“The strongest issue Republican states have is that it’s not very clear what the provision means,” he told CBS News. “It’s not clear if if you reduce taxes in any way you lose all the money the car would give you or just the amount you lose due to tax cuts. It’s also not clear what it means to ‘directly or indirectly’ use funds to offset loss of income due to tax cuts “.
The Ohio case, he said, has teeth for most of the same reasons the Trump administration lost legal battles over efforts to withhold federal money from sanctuary cities that refused to cooperate with immigration authorities.
In cases related to the previous administration, Somin said Congress never clearly authorized the imposition of conditions on state and local governments to receive the money the Trump administration was trying to withdraw.
“Under Obama administrations, Republican states used the argument of federalism to attack Obama’s policies. Under Trump, it was the blue states and cities that did it, and now we’re back the other way. “Somin said. “It’s a common phenomenon, but it shows that federalism can protect states from different kinds of political convictions.”
“The irony,” he continued, “is that if this thing fails, it could fail on some of the same bases as Trump’s effort to coerce sanctuary cities.”
Somin said he is not aware of a similar provision in a law on the same scale as the coronavirus relief package.
At the heart of Republicans’ challenge to the ban is that “Uncle Sam can’t be made to tell the good people of Louisiana or Texas how to manage their tax systems,” Kenneth Manning, a political science professor at the University of Massachusetts in Dartmouth, he told CBS News.
“States need cash,” he said of attending the bailout plan. “There are a lot of ruined schools and harassed unemployment systems and the list is endless of what the needs are at the state level. I don’t see big tax cuts as a result.”
President Biden won a major legislative victory when Congress closely past his $ 1.9 trillion aid package, and he and senior officials in his administration have embarked on a nationwide tour to promote its benefits. However, the Treasury Department is expected to have more details on the implementation of the stimulus package.
By law, states are ready to receive their federal aid within 60 days after sending the documentation to the federal government.