One of the rotten Easter eggs buried in the 1.9 trillion-dollar Degenerate Democrat Spending Bailout bill (The American Rescue Plan Act) is a provision that could be interpreted to grant the Feds extortion power over tax cuts at the state level.
Related: Given a Chance to Provide Actual COVID Relief to NH Small Businesses 20 Republicans Say, No!
[S]ection 9901 of the Act,1 forbid States from using COVID-19 relief funds to “directly or indirectly offset a reduction in … net tax revenue” resulting from state laws or regulations that reduce tax burdens—whether by cutting rates or by giving rebates, deductions, credits, “or otherwise[.]
If you cut any taxes, we might yank those bail-outs back.
This means the Feds don’t want you filling budget holes with other people’s money and that’s crazy because 1) that’s all this bill does and 2) it is more specifically a bailout for Blue State’s that would never consider cutting taxes.
States that could manage without this bailout (let’s call them donor states) may be prohibited by the Bill from making their state’s even more favorable (by lowering taxes) in comparison to those tax and spend blue states.
The State AG’s have add that,
This language (in the legislation) could be read to deny States the ability to cut taxes in any manner whatsoever—even if they would have provided such tax relief with or without the prospect of COVID-19 relief funds. 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 (i.e., the revenue half). Indeed, such federal usurpation of state tax policy would represent the greatest attempted invasion of state sovereignty by Congress in the history of our Republic.
Congressional Democrats appear to have set this trap and these AG’s are looking to disarm it;
But no one in Republican Governor Cris Sununu’s administration thought it concerning given that we have several tax-cut proposals on tap this session?
As written taking bailout bucks could be construed to make passing those tax cuts untenable.
The “prohibition on “indirectly” offsetting reductions in tax revenue, combined with the list of prohibited kinds of tax reductions (rate cuts, rebates, deductions, credits, or “otherwise”), could also be read to prohibit tax cuts or relief of any stripe, even if wholly unrelated to and independent of the availability of relief funds.”
Is anyone concerned?
Certainly not our all-Democrat Congressional Delegation which is giddy about the package, warts and all. They are already bragging about all the money they will score for the Granite State without bothering to mention the monumental amount of debt they are creating (plus interest) or any of the strings, including the one that concerns twenty-one state Attorneys general (but not ours).
Nor are they talking about how most of this money goes to states that are not New Hampshire to bail them out – no worry about tax cuts in these liberal ghettoes; they will be raising them.
So, the “Plan” is to act like the legislation is not laundering away the future – to backstop bad leadership in places like New York, California, and Illinois.
Federal Legislation that punishes you for lower taxes (even when it is not related to the latest federal bailout) is extortion, not compassion.
Why New Hampshire is not in on exposing or opposing this shakedown is probably a result of official hand-scrubbing at the supposed windfall and no regard for the short or long-term consequences.
yellen_letter_3-16_final Rescue Plan Tax oversight
