President Joe Biden
Image from C-SPAN.org

Does the Rescue Plan attack state sovereignty?

Is Joe Biden and Congress trying to dictate tax policy to all 50 states?

On Monday, Joe Coletti highlighted – among other reasons – that North Carolina should “just say no” to the federal funds included in the recently-passed American Rescue Plan Act because it potentially threatens states’ ability to cut taxes through 2024.

There is sufficient uncertainty over the provision, which prompted 21 state attorneys general to co-sign a letter to Treasury Secretary Janet Yellen on Monday. As reported by the AP:

In a letter to Treasury Secretary Janet Yellen on Monday, they said the prohibition is “unclear, but potentially breathtaking” — airing concerns that any tax cut could be construed as taking advantage of the pandemic relief funds.

The attorneys general list over a dozen instances of states currently considering new tax credits or cuts that they believe could be jeopardized simply because of the relief funds.

“We ask that you confirm that the American Rescue Plan Act does not prohibit States from generally providing tax relief,” wrote the coalition, led by Georgia, Arizona and West Virginia.

North Carolina attorney general Josh Stein did not sign on to the letter.

Whether or not the federal Rescue Plan would allow states to cut taxes in any shape or form over the next three years is no small matter, and should be clarified immediately.

The letter further says “Absent a more sensible interpretation from your department, this provision would amount to an unprecedented
and unconstitutional intrusion on the separate sovereignty of the States,” and “such federal usurpation of state tax policy would represent the greatest attempted invasion of state sovereignty by Congress in the history of our Republic.”

 

 

Brian Balfour / Senior Vice President of Research

Brian is Senior Vice President of Research at the John Locke Foundation