Ohio Attorney General Dave Yost sued the Biden administration Wednesday over its $1.9 trillion coronavirus relief package, alleging the federal government sought to impose “unconstitutional” limits on states’ ability to access some of the aid.
The Ohio lawsuit centers on a $350 billion fund meant to help cities, counties and states cover the costs of responding to the coronavirus pandemic. The stimulus law opened the door for cash-strapped local governments to tap federal aid to pay for expenses, including for first responders, although it prohibited states from using the money to directly or indirectly offset new tax cuts.
To Ohio, though, the restriction on cutting taxes is overly broad, putting states that had planned any tax cuts — even those that predate the pandemic — in jeopardy of losing access to the federal relief money. Yost said the federal government had no right to make such a demand, and the attorney general asked a federal court in Ohio to grant a preliminary injunction preventing the portion of the stimulus law from being enforced.
“The Tax Mandate thus gives the States a choice: they can have either the badly needed federal funds or their sovereign authority to set state tax policy. But they cannot have both. In our current economic crisis, that is no choice at all,” Ohio’s lawyers wrote in the court filing.
Yost, in an interview, said the “plain meaning of the statute is unconstitutional.”
The lawsuit echoes the criticisms raised by other Republican leaders, who wrote Treasury Secretary Janet Yellen on Tuesday to ask her to clarify the law’s application by March 23 — or face “appropriate additional action.” The letter from the attorneys general of Arizona, Georgia, West Virginia and 18 other states said the stimulus, absent clarification, “would represent the greatest invasion of state sovereignty by Congress in the history of our Republic.”
The White House did not immediately respond to a request for comment.
A White House administration official, speaking Tuesday on the condition of anonymity because they were not authorized to comment on internal discussions, said Congress is well within its rights to “establish reasonable conditions on how states should use federal funding.” The official added that the American Rescue Plan doesn’t prohibit all tax cuts, just mandates that states have to replace the revenue in some other way — and that they can’t use stimulus funds to do it.
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The lawsuit evinces Republicans’ deep misgivings about the $1.9 trillion stimulus, which passed the House and Senate entirely with Democratic votes, even though the proposal has attracted support among voters from both parties nationwide. Implementing the relief package marks the White House’s next major undertaking, which must muscle through logistical and political headaches alike.
This week, the Biden administration tapped Gene Sperling, a former top White House budget official, to oversee its efforts across Washington to bring the stimulus online. Biden and Vice President Harris, meanwhile, embarked on a national tour to promote the benefits of the plan, which will send them both to Georgia on Friday.
Ohio’s legal salvo comes as the Treasury Department is only just beginning its work to implement the $350 billion local aid program, which will take weeks to stand up. Mayors, governors and other local leaders nationwide for months had called on Washington to deliver them the significant burst of cash, citing the impact of the pandemic on their bottom lines. More than half of all U.S. states have seen revenue fall from the prior year, cutting deeply into their spending and employment, even as they’ve managed to stave off the most crippling cuts.
Ohio, in particular, stands to see about $11.2 billion in fiscal relief at the state and local levels, according to a March analysis from the Congressional Research Service. The money could provide a boost after Gov. Mike DeWine (R) ordered $390 million in new spending cuts across state agencies in January.
But Yost said his state, and others like it, may find themselves struggling to take advantage of the stimulus given the federal governments restrictions. His lawsuit contends “every change” in tax policy that could affect revenue ultimately violates the stimulus prohibitions, even though the Constitution gives states broad latitude to manage their own budgets. He also said the U.S. government had overstepped in seeking to force states to pay back the money if they do impose tax cuts.
“Let’s assume they spend the whole thing, and the federal government comes back and says … we want the money back,” the attorney general said. “Well, it’s gone. Where are we supposed to get that?”
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