Arizona‘s attorney general “can't rely on the Biden administration” to act immediately on tax cuts without jeopardizing coronavirus relief funds, he said.
Attorney General Mark Brnovich sued the Biden administration over the American Rescue Plan’s no-tax cut condition because he “can’t rely on a kind of wait-and-see approach” on whether his state can cut taxes without forfeiting federal relief funds, he told the Washington Examiner in an interview Thursday.
After filing suit in late March, Brnovich asked the U.S. District Court of Arizona on Monday to issue a preliminary injunction to stop Treasury Secretary Janet Yellen from instituting a recoupment program under a provision in the Democrats’ bill saying that states may not use federal relief funds to offset a reduction, directly or indirectly, in the net tax revenue.
“[In] Arizona, along with other states, the legislatures are in session right now,” Brnovich told the Washington Examiner. “We can’t rely on the Biden administration doing the right thing later. If we want to cut taxes now, we have to know that we can do so now without jeopardizing COVID relief funds.”
Brnovich led an effort in March seeking clarity from the department about the provision, saying that depending on the interpretation, the language of the provision could affect state sovereignty by dictating its tax policies.
Brnovich threatened “appropriate additional action” unless the administration ensured states could accept relief funds and cut taxes in a March 16 letter to Yellen, co-signed by 20 other Republican attorneys general.
Yellen responded, “It is well established that Congress may place such reasonable conditions on how states may use federal fundings.” She added, however, that “nothing in the Act prevents states from enacting a broad variety of tax cuts.”
The Treasury Department is crafting further guidance, Yellen said, though Brnovich said he hasn't seen any such notice.
The Washington Examiner reached out to the Treasury Department for comment about the states’ suits and Yellen's guidance on the provision but did not receive a response.
Yellen's response “created more uncertainty,” Brnovich said, adding, “Any official can’t be in the position where they think if they cut taxes, they’re going to jeopardize billions of dollars in stimulus money.”
Before filing the motion for a preliminary injunction Monday, Brnovich filed an initial suit against the administration March 25, after Yellen responded to the Republican attorneys general.
Fifteen other states have either filed their own suits or joined other litigation over the tax provision.
Brnovich summed up his legal argument Thursday, saying the relief bill provision reflects “the erosion of federalism” and that it undermines state sovereignty, nationalizes the country’s tax and spending structure, and violates the 10th Amendment.
“The federal government will send you $1,400 of your own tax money and call it a stimulus check, but they are stopping the states from cutting your taxes by $1,400,” he said.
A hearing for the preliminary injunction motion has not yet been set.
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