Thirteen more states are suing the Treasury Department over what they characterize as “one of the most egregious power grabs by the federal government” in U.S. history.
The lawsuit alleges that a provision added to President Joe Biden’s $1.9 trillion relief package is unconstitutional because it limits the ability of states to provide tax cuts. They argue that the provision dictates that in order to receive some $350 billion in funding designated for state and local governments, states must abstain from any form of tax cut.
West Virginia Attorney General Patrick Morrisey, Alabama Attorney General Steve Marshall, and Arkansas Attorney General Leslie Rutledge are leading the litigation, along with support from 10 other states. The suit was filed on Wednesday in the U.S. District Court for the Northern District of Alabama.
ARIZONA JOINS OHIO IN SUING BIDEN ADMINISTRATION AS TAX BATTLE ESCALATES
The provision the GOP attorneys general are targeting says that the funding cannot be used to offset tax cuts or credits “directly or indirectly.” The parties in question argue that determining whether or not the funding is being used to offset a tax cut is not possible due to the fungibility of money. They argue that the mandate violates the 10th Amendment, the conditional spending doctrine, and the anti-commandeering doctrine.
“Never before has the federal government attempted such a complete takeover of state finances,” said Morrisey in a statement. “We cannot stand for such overreach. The Constitution envisions co-sovereign states, not a federal government that forces state legislatures to forfeit one of their core constitutional functions in exchange for a large check equal to approximately 25 percent of their annual respective general budgets.”
The other states that have signed on are Alaska, Florida, Iowa, Kansas, Montana, New Hampshire, Oklahoma, South Carolina, South Dakota, and Utah. Many of the attorneys general of those states had previously signed an open letter to Treasury Secretary Janet Yellen calling for clarification about the provision. The lawsuit was not entirely unexpected as they had threatened legal action over the matter.
Yellen addressed the brewing tax war during her first joint hearing with Federal Reserve Chairman Jerome Powell last week. The secretary said that the Treasury Department has 60 days from when the law was enacted to issue guidance on the matter and acknowledged a “host of thorny questions” that the department will have to comb through.
“We will have to define what it means to use money from this act as an offset for tax cuts, and given the fungibility of money, it’s a hard question to answer,” she said. “But that’s what we’re required to do, and we will do our best to offer guidance on it.”
The 13 states join Ohio, Arizona, and Missouri, which have separately filed their own lawsuits over the provision.
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The Washington Examiner contacted the Treasury Department for comment but did not immediately receive a response.
