Showdown Over the American Rescue Plan
A last-minute provision added to the $1.9 trillion American Rescue Plan prevents states from using the money directly or indirectly on tax cuts.
The Wall Street Journal reports Five States Filed a Lawsuit against that provision.
Republican lawmakers and attorneys general argued the provision, which would apply for three years, is overly vague, unconstitutional and would unfairly penalize states in good fiscal health. Five states have filed lawsuits seeking an injunction against the provision—the first hearing is scheduled for the end of the month—and Republicans in Congress have introduced legislation to repeal it.
“It is potentially a significant restriction on state fiscal authority, and some of that may come down to the Treasury guidance,” said Jared Walczak, vice president of state projects at the conservative-leaning Tax Foundation. “If this became a broad restriction, that raises serious constitutional questions.”
One issue is how the federal government defines “indirectly.” If states use federal aid to pay teachers and firefighters, for example, then use the savings to lower taxes, that could be considered an indirect tax cut, Mr. Walczak said.
It is unclear how far that logic would extend. Among the questions states have asked: Would policy changes, such as new tax incentives for businesses, be considered indirect tax cuts?
Money is Fungible
The stipulation effectively says states that accept any money cannot cut any taxes for three years.
Idaho, Utah, Arizona and North Carolina, and West Virginia were weighing tax cuts for the coming fiscal year and now they can’t if they accept any stimulus money.
Treasury Secretary Janet Yellen offered this cop-out. States can reduce taxes if they offset the revenue.
Effectively, states can reduce taxes if they raise other taxes.
The Journal noted that Ms. Yellen acknowledged that defining what it means to use the aid as a revenue offset is tricky. “Given the fungibility of money, it’s a hard question to answer,” she told the Senate Banking Committee on March 24.
No Place or Time for Nonsense
There is no need or place for this kind of nonsense.
Democrats allegedly want bipartisan legislation then cram this kind of nonsense straight down Republicans’ throats.
Note that Republicans have done similar things in the past with abortion funding rules. Such provisions went nowhere because money is fungible.
This time, however, Democrats added the “directly or indirectly” provision provoking the lawsuit.
Mish
It is money from the Federal government and it can dictate how it is used. If you don’t like the conditions, don’t take it! But, no. These regressive oligarch ass-kissers want to give their bosses more tax cuts with it.
Just curious, but why do you care what a state does with it?
I can’t speak for@whirlaway but would surmise that s/he believes that — as a federal taxpayer — his/her money should not be used by the States for things that s/he dislikes. In this instance, it would appear that @whirlaway would argue that the State tax cuts would go to the “bosses” of “oligarch ass-kissers,” who presumably are not deserving of such tax cuts.
I can certainly understand the impulse — as a federal taxpayer — to resist the use of federal funds by the States for things that I consider ill-targeted, immoral, or gravely evil. For example, I like the Hyde Amendment because I don’t want my federal tax dollars (via federal Medicaid dollars to States) paying for the dismemberment and death of unborn children, since I believe abortion is a grave evil. I’m not a fan of the use of my federal taxes for waging the war on drugs, though I admit that such a use is not a grave evil but a well-intentioned yet ill-targeted pursuit.
I understand that, but is lowering taxes a “grave evil”, or “immoral”? Does it matter what taxes the state reduces? For example, suppose a state eliminated sales taxes on food. Would that be a “grave evil”?
Personally, I don’t really care what the states do with the money. Each state has it’s own situation, and is in the best position to determine it’s own needs. For example, consider a state that uses the money to shore up pensions. In the absence of the Federal money, they would need to do a tax increase to fund the pension, so using the Federal money would be identical to doing a tax increase to fund the pension, and then using the Federal money to reduce the taxes.
I wouldn’t call reducing taxes to be evil or ill-considered. To be sure, I’d call ANY population-wide tax reduction good, as by its nature it is returning money to people & not being spent by politicians with their own personal or political motives.
It’s certainly a wise view on your part to leave the States to make their own decisions regarding any federal funds they receive. I would say that your view parallels the 10th Amendment to the U.S. Constitution & shows an appreciation for subsidiary, the idea that lower levels of government are best-equipped to complete certain tasks.
Personally, I echo your views up to the point where a policy would constitute a grave evil. In other words, I think that the States should spend federal money on whatever they want unless it causes the intentional killing or maiming of an innocent human being, born or unborn. That means abortion or forced sterilization would be out, but it still leaves a wide berth for States to act.
Yes, the feds can dictate what the States do with the money, but “if Congress intends to impose a condition on the grant of federal moneys, it must do so unambiguously.” Pennhurst State Sch. & Hosp. v. Halderman, 451 U.S. 1, 36 (1981). Unless “indirectly” is more precisely defined in the statute — and I doubt that these plaintiffs would be bringing this claim if there was such a precise definition — I would venture to say that the statute is impermissibly vague. The fact that the Treasury Secretary admits to the vagueness before a congressional committee is excellent evidence of this fact.
Since when did a Federal, or State, passed “Bill Specifies” mean anything?
The answer here is easy enough. The states that are fiscally healthy should make plans to remain fiscally healthy. During Covid, they no doubt spent down their “rainy day” funds (the governmental equivalent of a savings account). They should run a surplus, and put the excess back into the rainy day fund. Then they should explain to their voters what they are doing and why.
Treat voters as capable and understanding, and just tell them “Look, we are running a surplus, and we’d like to give you a tax cut, but the Federal Government says we can’t, so we are building up our rainy day fund. In three years, the restrictions on tax cuts will cease, and by then we should be in outstanding fiscal health, and in a position to give a tax cut.”
Exactly. Maybe next time they won’t be clamoring for a handout from the feds.
The states clamoring for a Federal handout were the states that are fiscal disasters, notably Illinois and New York.
Are any of the other states rejecting the handout?
Good point. If you gave me $100 and imposed some conditions on me that I don’t like, then all I have to do is to not take it.
The problem is they aren’t giving you money or handouts (Zardoz).
What the gov’t has done is borrow 6K in the name of every man, woman and child in this country (1.9 trillion/320 million people) because they felt the economy needed to be goosed. They are offering to let people have some say over how part of THEIR money is spent (via money sent to each states). Only they are attaching stipulations that you must spend it rather than pay down some of that 6K debt in your name or else they will give it to someone else and you’ll still owe 6K. That’s sheer audacity on their part.
Or just park it a the fed for 1% for 3 years. Nothing says they have to spend any of it.
Then in 3 years roll out the tax cut.
They don’t need a rainy day fund. Just don’t roll over all their bonds.
I know my state has a balanced budget provision in the Constitution. There are no bonds issued by the state, except for independent entities, such as cities or public power districts. They do have a rainy day fund set aside for bad years, and they did use funds from the rainy day fund last year. They have been working on trying to come up with a property tax cut for a few years, and it was postponed due to Covid, and I’d guess will be on hold for another three years, now.
Let them cut taxes, on condition they won’t ever receive disaster relief again.
what would be the point of that?
Give them the freedom to make that decision, but also give them the consequences.
If I was a state, I’d sign up for that in a heartbeat. Only because it would be impossible to enforce.
Imagine there is a nuclear accident. You think the rest of the country isn’t sending relief or help. Even a lesser disaster could easily (likely) wipe out all the insurance companies in the whole country and could cause major disruptions all over the whole country.
Ah, the old Red State Shuffle. Act like a spoiled brat, but rely on compassion to secure funds from the blue states.
Red States donate funds and man hours too my friend.
You on the other hand simply want to punish states that don’t want to spend money the way you think they should making the federal gov’t into a giant bully.
My point was that the states should call your bluff because it’s clear the feds and other states would never follow through with it for humanitarian reasons.
Lol we talking private donations or taxpayer funded federal relief?
Top Republicans Work To Rebrand GOP As Party Of Working Class link to npr.org
The problem with this is, as jobs have become more technical and complex, there are fewer morons working them. The GOP NEEDS morons, because nobody else buys their culture war bullshit.
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When they turned the party over to GOP from southern states, it became a different party. This no longer the party of Reagan or GHWB. They can mask it however they want but they have zero interest in improving the lives of working class. Trump vomited all over the GOP and now they trying to make the vomit palatable.
“This no longer the party of Reagan or GHWB”
Correct. However, Trump at least made a semblance of sticking up for the working class by trying to repeal Obamacare, building a wall, and renegotiating trade deals. Biden just wants to have open borders and allow the corporations to rule. And you are a racist if you are against this! Got it!?
Explain how repealing Obamacare helps the working class, please.
The wall didn’t get built.
Biden is catching hell for the refugee camps on the border.
trump IS a corporation.
What color is the sky on your planet?
Republicans definitely need to re-brand. Right now they are the party of racists and the party in favor of instituting a dictatorship. They can never win if they remain as they are.
They’re nihilists that haven’t figured out that nihilism is pointless to believe. Most people grow out of that in Jr High.
This Congress and this administration are working overtime to federalize every function they can get their hands on. States and local governments are about to be rendered useless. Just wait for the summer of love riots, oops, can’t use that word, “insurrections” and the push for a “national police force” for “fairness.”
Democrats, and their Republican waifs (Romney, et al.) are part of a criminal conspiracy against the Constitution and have been for nearly a century.
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Well put!
Yea, its non-sense. Congress intended to fund expenditures not tax cuts. Sure money is fungible but it seems like bunch of states prefer to issue tax cuts than spend mone on projects intended by the bill. I’ll leave it to legal experts to sort it out.