Ohio AG Sues Biden Administration to Use Stimulus State Aid to Fund Tax Cuts

Ohio Attorney General Dave Yost filed a lawsuit seeking to block coronavirus relief bill provision that bars states from using aid provided by the bill to fund tax cuts, Politico reports.

The bill provides about $20 billion to states but prevents them from using that money to “directly or indirectly offset a reduction in the net tax revenue” arising from “a change in law, regulation or administrative interpretation” that “reduces any tax (by providing for a reduction in a rate, a rebate, a deduction, a credit or otherwise) or delays the implementation of any tax or tax increase.”

That provision has sparked backlash from Republicans. Nearly two dozen Republican attorneys general wrote a letter to Treasury Secretary Janet Yellen calling the provision “the greatest attempted invasion of state sovereignty by Congress in the history of our Republic.”

House Republicans sent a separate letter to Yellen arguing the provision “tramples” on state rights and "may in fact be unconstitutional."

Ohio AG sues:

Yost filed a lawsuit against the Biden administration asking a court to strike down the provision as unconstitutional, arguing that it would prevent states from cutting any taxes.

“Money is fungible, so any revenue lost from a tax credit, deduction, rebate, delay, or decrease that Ohio legislators or executive officers may implement would be 'indirectly' offset by the $5.5 billion the State expects to receive,” the lawsuit said.

“Any state that reduces taxes, and that experiences a loss in tax revenue, is subject to having billions of dollars in federal funding recouped by the Department of the Treasury,” the complaint argued.

Admin defends:

“It is well established that Congress may establish reasonable conditions on how states should use federal funding that the states are provided,” Treasury Department spokesperson Alexandra LaManna told Politico. “Those sorts of reasonable funding conditions are used all the time — and they are constitutional.”

LaManna argued that the provision does not ban all tax cuts.

“States are free to make policy decisions to cut taxes — they just cannot use the pandemic relief funds to pay for those tax cuts,” she said.


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