Republicans were dealt a blow Monday after the Supreme Court rejected a challenge to President Joe Biden's prohibition on tax cuts in a COVID-19 aid package, the Conservative Brief reported. States were prevented from using funds "to either directly or indirectly offset a reduction in the net tax revenue of the state."
The $1.9 trillion American Rescue Plan was passed in 2021 to help states with pandemic-related expenditures. Instead, it hamstrung their ability to give constituents tax relief.
The Treasury Department under Secretary Janet Yellen issued guidance on how provisions in the legislation would be applied. That prompted Missouri to file a lawsuit in May that was joined by several other GOP-led states, including Alabama.
Alabama Attorney General Steve Marshall told CBS News it was an overreach by the federal government. "The proposed regulations do not make this unprecedented and unconstitutional statute any more constitutional," Marshall said.
"If anything, they confirm the tremendous scope of influence the federal government intends to wield over how Alabama exercises its sovereign power," he added. "Unfortunately, what Congress passed in the American Rescue Plan was ambiguous, and Secretary Yellen still has not provided clear guidelines."
Arizona had also joined the lawsuit with similar objections. "Americans cannot put their faith in whatever the latest interpretation is from the Biden Administration," then-Attorney General Mark Brnovich for Arizona said at the time.
"Arizona should not be put in a position of losing billions of dollars because the federal government wants to commandeer states’ tax policies." The matter ended up at the Supreme Court after a federal district court rejected the initial challenge citing Missouri's lack of standing.
The U.S. Court of Appeals for the 8th Circuit concurred, citing no "intent to engage in conduct" prohibited by the law nor in the interpretation Yellen set forth. The court's rejection of the matter means the lower court's ruling stands.
However, as Missouri Attorney General Eric Schmitt pointed out, the application of the tax mandate provision could trigger the very challenge currently rejected. He said it's "simple: The tax mandate prohibits only the deliberate use of ARPA funds to pay for a tax cut; if it sweeps more broadly, the law is unconstitutional."
The ambiguity of the provision and how it may be applied could be costly for states tripped up by it. The provision allows the government to recover the funds should the states violate the law, leaving lawmakers in a precarious position.
The American Rescue Plan has more problems than tax implications, however. The pork-filled package has come under scrutiny for some of the more frivolous expenditures, not to mention the hefty pricetag that adds to inflation woes, Fox News reported.
Some $825,000 went to "Diversifying Oral History Practice: A Fellowship Program for Under/Unemployed Oral Historians" to fund eleven fellowships. They will last a year and provide $60,000 for oral historians who come "from communities which have been historically marginalized in the field," including "Indigenous peoples, people of color, people with disabilities, and working-class people."
Other throwaway projects included $50,000 for a non-profit 500 Sails for "reopening programs that teach Indigenous canoe-building and explore pre-colonial sea life." Philadelphia's Science History Institute in Philadelphia received $359,097 to construct a "multiplatform project exploring the historical roots and persistent legacies of racism in American science and medicine."
Biden's relief package appears to be a power and money grab at the expense of the American people. While many struggle to put food on the table thanks to inflation, the president is compounding the problem by also ensuring states won't cut their taxes.