Judge blocks tax cut rule in American Rescue Plan




 

MONTGOMERY, Ala. (AP) - A federal judge has blocked the U.S. Treasury from enforcing a provision of the American Rescue Plan Act that prohibited states from using the pandemic relief funds to offset new tax cuts.

U.S. District Judge L. Scott Coogler ruled Monday in Alabama that Congress exceeded its power in putting the so-called tax mandate on states. He entered a final judgement in favor of 13 states that had filed a lawsuit and instructed the Treasury Department not to enforce the provision. The judge left the rest of the law in place.

The American Rescue Plan steered $195 billion in flexible relief funds to states but specified that states could not use it as a means to cut taxes by using the federal relief dollars to offset the revenue reduction.

The judge described the tax-cut restrictions as "a federal invasion of State sovereignty" that was "unconstitutionally ambiguous" - leaving states guessing as to whether their tax cuts would trigger a repayment of federal funds.

"The Tax Mandate's restriction on direct or indirect state tax cuts pressures States into adopting a particular - and federally preferred - tax policy," Coogler wrote. That "may disincentive" states "from considering any tax reductions for fear of forfeiting ARPA funds,"

The lawsuit was filed by Alabama, Arkansas, Alaska, Florida, Iowa, Kansas, Montana, New Hampshire, Oklahoma, South Carolina, South Dakota, Utah and West Virginia.

Alabama Attorney General Steve Marshal called that tax-cut restrictions "an unprecedented and unconstitutional assault on state sovereignty by the federal government."

Officials from other states on Tuesday also praised the ruling.

West Virginia Attorney General Patrick Morrisey said the decision "ensures our citizens aren't stuck with an unforeseen bill from the feds years from now."

Kansas Attorney General Derek Schmidt said it "clears the way" for the state to pursue a sales tax cut on groceries "without fear of federal reprisal."

Justice Department lawyers representing the Treasury Department argued the money should be used for its intended purpose - pandemic recovery.

"Congress did not provide Rescue Plan funds for States to replace purposeful decreases in net tax revenue; it provided the money to help States economically recover from the pandemic in ways they otherwise could not," federal lawyers wrote in an August court filing.

Federal government lawyers added, "states are free to cut all the taxes they want, as long as they do not use the federal aid to 'offset' any decreased revenue."

___

Associated Press writer David A. Lieb contributed from Jefferson City, Missouri.

COMMENTS

More Related News

U.S. companies push Biden, Congress for caution on Russia sanctions
U.S. companies push Biden, Congress for caution on Russia sanctions
  • US
  • 2022-01-26 06:15:07Z

U.S. President Joe Biden has threatened to impose devastating sanctions on Russia if leader Vladimir Putin invades Ukraine, but some big companies and...

After deadly 2021, Indianapolis police set priorities for the new year
After deadly 2021, Indianapolis police set priorities for the new year
  • US
  • 2022-01-24 23:28:20Z

Indianapolis law enforcement officials said they will continue many initiatives they began in 2021, when there were 271 homicides.

Leave a Comment

Your email address will not be published. Required fields are marked with *

Cancel reply

Comments

Top News: Latin America