The Utah Taxpayers Association and 16 other state taxpayer associations sent a letter to U.S. Treasury Secretary Janet Yellen on March 17 asking for guidelines to clarify provisions of the American Rescue Plan Act – the federal COVID-relief law that includes a provision restricting tax reductions by states that accept relief funds.

HR 1319, signed by President Joe Biden on March 11, provides approximately $350 billion to state and local governments to mitigate the economic impact of the pandemic. Section 602(c)(2)(A) restricts states from using the funds “to either directly or indirectly offset a reduction in the net tax revenue of such State or territory resulting from a change in law, regulation, or administrative interpretation during the covered period that reduces any tax (by providing for a reduction in a rate, a rebate, a deduction, a credit, or otherwise) or delays the imposition of any tax or tax increase.”

The language in the law is an assault on state sovereignty. The State of Ohio has already sued the Treasury to enjoin the mandate. As stated by Chief Justice Roberts in NFIB v. Sebelius (2012), Congress can’t use “economic dragooning that leaves the states with no real option but to acquiesce.” 

We agree with the Editorial Board of the Wall Street Journal that said some in Congress, “want to take credit for their spending blowout as the pandemic recedes, even as they protect their state counterparts from economic competition from small-government states. That’s an affront to representative government and a classic distortion of the constitutional structure that cries out for judicial review.”