Twenty-one Republican attorneys general have threatened to take action against the Biden administration over a key element of the recently enacted $1.9 trillion coronavirus relief law, warning that a provision preventing states from lowering taxes marks the "the greatest attempted invasion of state sovereignty by Congress in the history of our Republic."
In a seven-page letter addressed to Treasury Secretary Janet Yellen, the Republican officials argued that a restriction included as part of the $350 billion for state, local and tribal governments that prevents them from using the federal aid to "to either directly or indirectly offset a reduction in the net tax revenue" is unconstitutional.
"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 of essentially one half of the State's fiscal ledgers," they wrote in the Tuesday letter.
The restriction, which was added at the last-minute by Senate Democrats, is designed to ensure that states use the money to keep their local economies afloat, including avoiding massive budget cuts and job losses, rather than subsidize tax cuts. If states violate these conditions, they will be required to repay the federal government.
The Republican officials, including the attorneys general from Texas, Florida and West Virginia, questioned Yellen over how the administration intended to interpret the law. For instance, they wondered whether states will be prohibited from cutting taxes for any reason, even if those measures were put into place before the bill's passage, or whether the law explicitly prevents states from using the coronavirus relief funds to offset new tax cuts.
"This language could be read to deny states the ability to cut taxes in any manner whatsoever — even if they would have provided such tax relief with or without the prospect of Covid-19 relief funds," the officials wrote.
The $350 billion aid included in the American Rescue Plan, which President Biden signed into law last Thursday, includes $195.3 billion directed toward state governments and Washington, and $130.2 billion allocated for local governments. An additional $20 billion will be given to federally recognized tribal governments, while $4.5 billion will go to U.S. territories.
No Republican voted to pass the relief package.
More money will be given to states that had a higher number of unemployed citizens at the end of 2020 rather than the overall population, which has irked some states in the South and Midwest, which tend to have Republican governors and better jobless rates. While many Democrat-led states implemented strict lockdown measures to curb the spread of the virus, some of their GOP counterparts adopted a more laissez-faire approach, allowing businesses to remain open for a better part of the pandemic.