July 3, 2022

Joe Biden suffers massive loss in court, Republican states win case to retain right to cut taxes

Tax cuts are generally popular with Republicans. However, Democrats have found a way to limit them — until now.

A group of Republican-led states won an injunction against a provision limiting the right of states to cut taxes that’s part of President Joe Biden’s $1.9 trillion American Rescue Plan Act, the Washington Examiner reported. States were required to refrain from tax cuts to receive a chunk of the handout.

More than a dozen states sued the administration claiming it was unconstitutional to limit a state’s power to collect or cut taxes. The injunction, handed down Tuesday from U.S. District Judge L. Scott Coogler of the Northern District of Alabama, will prevent Treasury Secretary Janet Yellen from enforcing the provision.

The bill, passed in March, stipulated that states receiving the funds couldn’t use it “directly or indirectly” toward tax cuts. That prompted several lawsuits, mostly from Republican states, including Iowa.

“This is a major victory for the State of Iowa and Iowa taxpayers,” Iowa Gov. Kim Reynolds said in a statement. “The Biden Administration was trying to punish fiscally responsible states like Iowa, which has a record budget surplus, and that’s why we took legal action. With this ruling, Biden’s Administration can’t keep us from cutting taxes and I look forward to doing just that,” the Republican lawmaker said.

When the bill was proposed in March, another 21 GOP attorneys general threatened the Biden administration on the same provision, Fox Business reported. “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 through federal usurpation of essentially one-half of the State’s fiscal ledgers,” they charged in a letter to Yellen at the time.

Though not explicitly stated, this provision would cut against Republicans who run their states more responsibly and often return the surplus to their constituents. By tying federal funding to taxing authority, it slapped states with a double whammy against Republicans that was unfair and unconstitutional — and thankfully, the judge agreed.

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