Alabama Attorney General Steve Marshall is leading a multi-state lawsuit against the Biden administration over a provision in the recently passed stimulus bill that bans states from cutting taxes.
Called the American Rescue Plan by its Democratic authors and derided as unnecessary and overly expensive by most conservatives, the recent $1.9 trillion stimulus bill is sending $350 billion to state and local governments. It was championed by President Joe Biden during its path through Congress.
The bill contains language that prevents state legislatures from using the funds to “offset a reduction in the net tax revenue” of the state in question.
Marshall asserted in a statement on Wednesday that the provision in question “effectively bans states from cutting taxes for several years.”
“This federal tax mandate is an unprecedented and unconstitutional assault on state sovereignty by the federal government, which would commandeer the State of Alabama’s sovereign power to tax and spend and determine her own fiscal policies,” argued Marshall.
West Virginia Attorney General Patrick Morrissey is a co-lead on the suit. Marshall and Morrisey are being joined in the legal fight by the attorneys general from Alaska, Florida, Iowa, Kansas, Montana, New Hampshire, Oklahoma, South Carolina, South Dakota and Utah.
The stipulation that states accepting the stimulus money could not cut taxes was added shortly before the bill’s final passage. The New York Times reported that U.S. Senator Joe Machin (D-WV) was behind the provision’s inclusion. Machin has maintained in interviews that his goal was to ensure the stimulus funds were spent on recovery from the coronavirus pandemic.
Jared Walczak, an expert on state-level tax policy at the nonpartisan Tax Foundation, has called the legislation’s requirement state governments not cut taxes “an astonishing level of federal interference in states’ fiscal affairs,” and said that while the particularities of states being able to cut taxes were complex, “state policymakers have reason to be concerned.”
“It is possible to imagine several scenarios where tax cuts could be permitted, but in practice, many state tax cut proposals could run afoul of the federal legislation,” Walczak summarized.
Marshall’s lawsuit was filed in the U.S. District Court for the Northern District of Alabama. Similar legal efforts are already underway in three other states.
Alabama’s top law enforcement official maintained on Wednesday that the goal of his lawsuit is “to block the enforcement of this grievous federal encroachment on states’ rights.”