Attorney General Lynn Fitch joined twenty-one state attorneys general urging the U.S. Department of Treasury (“Treasury”) to take immediate action to ensure the American Rescue Plan Act (“Act”) does not strip states of their core authority to implement basic state tax policy.
“With this bill, Congress again defies the Constitution in an effort to strip states of their basic right to provide for our citizens’ welfare,” said Attorney General Lynn Fitch. “My colleagues and I make clear with this letter: we will do what we need to do to limit Washington to powers prescribed by the Constitution, and defend against federal overreach.”
Certain provisions of the Act forbid states from using COVID-19 relief funds to “directly or indirectly offset a reduction in…net tax revenues” resulting from state laws or regulations that reduce tax burdens, whether by cutting rates or by giving rebates, deductions, credits, “or otherwise.” Attorney General Fitch warns that this language could be used to deny Mississippi and other states the ability to cut taxes in any manner, even if the prospect of COVID-19 relief funds had no bearing on the decision to provide tax relief.
Attorney General Fitch and her colleagues are urging the Treasury to adopt a more sensible interpretation of the language in accompanying guidance, warning that a broad interpretation would result in an unprecedented and unconstitutional intrusion on the sovereignty of the States. The potential federal usurpation of state tax policy in this bill could represent the greatest invasion of state sovereignty by Congress ever attempted.
The attorneys general also warn that a single governor could accept stimulus funds, binding a state legislature or successor governor, and thereby, the electorate of a state, from cutting any tax or tax assessments in the near future. This would be a clear intrusion by Congress upon the democratic structures of the States.
Accordingly, Attorney General Fitch and her colleagues are asking the Treasury to confirm by March 23 that the Act does not prohibit States from generally providing tax relief, and that the Act simply precludes express use of the relief funds to provide direct tax cuts. The attorneys general will take further appropriate action if such an assurance is not provided to ensure that states like Mississippi have the clarity and assurance needed to enact and implement sensible tax policies for their taxpayers. Joining Attorney General Fitch were attorneys general from the states of Alabama, Arizona, Arkansas, Florida, Georgia, Idaho, Indiana, Kansas, Kentucky, Louisiana, Missouri, Montana, Nebraska, Oklahoma, South Carolina, South Dakota, Texas, Utah, West Virginia, and Wyoming.
A copy of the letter can be viewed here.