Is Section 602(c)(2)(A) of the American Rescue Plan Act Constitutional?

This provision seems to prohibit states that accept billions of dollars in federal funds from reducing taxes prior to 2024.

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Earlier this week, President Biden signed into law the American Rescue Plan Act. This law provides the states with more than $200 billion in aid. Of course, this money comes with strings. Section 602(c) imposes a series of requirements on how the funds can be used. Section 602(c)(1) provides permissible uses. For example, states can use the funds to cover costs in response to "to the public health emergency." By contrast, Section 602(c)(2) lists two categories of expenditures the funds cannot be used for. Section 602(c)(2)(B) addresses a common Republican criticism: the funds cannot be used to bail out pension funds. But Section 602(c)(2)(A) seems to limit a state's power to reduce taxes. It provides:

A State or territory shall not use the funds provided under this section or transferred pursuant to section 603(c)(4) to either directly or indirectly offset a reduction in the net tax revenue of such State or territory resulting from a change in law, regulation, or administrative interpretation during the covered period [from now till December 31, 2014] that reduces any tax (by providing for a reduction in a rate, a rebate, a deduction, a credit, or otherwise) or delays the imposition of any tax or tax increase.

The New York Times reports that Section 602(c)(2)(A) was added late in the process. The intent was clear: to prevent Republican states from using the funds to offset tax cuts:

Democrats slipped the new language into the legislation last week after several senators from the party's moderate wing expressed concern that some states would seize on the opportunity to use emergency relief money to subsidize tax cuts. They worked with Senator Chuck Schumer, the majority leader, on language for the amendment, according to a Democratic Senate aide.

Senator Joe Manchin III, Democrat of West Virginia, explained why he pushed for the language in a briefing this week, arguing that states should not be cutting taxes at a time when they need more money to combat the virus. He urged states to postpone their plans to cut taxes.

"How in the world would you cut your revenue during a pandemic and still need dollars?" Mr. Manchin said.

Already, Republicans are objecting to this policy:

But some Republican-led states are pointing to the apparent prohibition as a violation of their sovereignty and calling for that part of the law to be repealed. They see the requirement that states refrain from cutting taxes as an unusual intervention by the federal government in state tax policy.

"It is an intrusion into what would traditionally be a state prerogative of how we balance our budget," said Ben Watkins, the director of the Florida Division of Bond Finance. "If they want to give us this money to deal with Covid, then they should just give it to us with no strings attached."

On Tuesday, the WSJ editorialized against the provision:

Wow. Democrats in Washington are trying to dictate to governors and state legislatures that they can't change their tax laws if they accept their share of the $1.9 trillion. The sweeping prohibition would last through 2024, and the bill grants Treasury Secretary Janet Yellen authority to write regulations "as may be necessary or appropriate to carry" it out.

The language is so expansive that states could be limited from making any changes to their tax codes that reduce revenue even if they don't use federal funds as direct offsets. Much will depend on how Ms. Yellen defines "indirectly." States that don't comply with her interpretation will have to repay federal funds.

Several states including West Virginia, Mississippi, Arkansas and Idaho are considering tax cuts to attract people and business. Some GOP legislatures also want to start or expand private-school choice programs that give tax credits to businesses and individuals that donate money for scholarships. Treasury could say these policies break the law. Beltway Democrats are essentially barring GOP-led states from improving their competitiveness against high-tax Democratic states.

Senator Braun of Indiana has already proposed legislation that would remove this restriction. But bicameralism and presentment is unlikely here. The far more likely path, of course, is litigation.

The Wall Street Journal questioned whether this provision is constitutional:

The constitutionality of this is open to question. The Supreme Court's "anti-commandeering" doctrine prohibits Congress from using federal funds to coerce states.

There are a few doctrines at play here. First, New York v. United States held that Congress cannot force states to enact legislation. Such a federal mandate would amount to unconstitutional commandeering. But New York held that Congress can create financial incentives for states to enact legislation. In other words, Congress can offer money to the states with strings attached.

The second doctrine stems from South Dakota v. Dole and NFIB v. Sebelius. The Court has recognized that the Constitution imposes limits on Congress's power to put strings on federal payments to states. To be precise, legislation that runs afoul of these limitations is not a "proper" exercise of federal power.

Dole identified four, and really five limits on the federal spending power. First, "the exercise of the spending power must be in pursuit of 'the general welfare.'" This factor is almost always satisfied.

Second, Congress must place conditions on the funds "unambiguously." States need to know what they are getting into when they accept federal money. Section 602(c)(2)(A) may have some ambiguity problems. It isn't entirely clear what type of state legislation is prohibited. Indeed, if this provision unambiguously restricts a state's power to reduce taxes, then it may run into other problems.

Third, the conditions must "relate" to "the federal interest" for which the spending program was established. Dole did not define how closely "related" the condition must be to Congress's "purpose." Justice O'Connor's dissent provided a more narrow test for "relatedness," or "germaneness." I suppose the federal government could contend that avoiding tax cuts is "related" to Congress's intent to help provide relief. Senator Manchin's comments suggest this intent.

Fourth, "[o]ther constitutional provisions may provide an independent bar to conditional grant of federal funds." For example, the Dole majority held held that the Twenty-First Amendment, which allows states to regulate alcohol, was not such a bar. In dissent, Justice Brennan found that the Twenty-First Amendment did impose a bar.

The Court also found that the federal highway spending program did not violate the Tenth Amendment. Dole explained that the Tenth Amendment operates differently in the context of conditional spending, than it does in the context of "congressional regulation of state affairs." For example, Oklahoma v. Civil Service Comm'n (1947) upheld the Hatch Act's restrictions on state employees, because Oklahoma accepted federal funds. Chief Justice Rehnquist wrote:

The State contended that an order under this provision to withhold certain federal funds unless a state official was removed invaded its sovereignty in violation of the Tenth Amendment. Though finding that "the United States is not concerned with, and has no power to regulate, local political activities as such of state officials," the Court nevertheless held that the Federal Government "does have power to fix the terms upon which its money allotments to states shall be disbursed." The Court found no violation of the State's sovereignty because the State could, and did, adopt "the 'simple expedient' of not yielding to what she urges is federal coercion. The offer of benefits to a state by the United States dependent upon cooperation by the state with federal plans, assumedly for the general welfare, is not unusual."

Rehnquist observed that the "independent constitutional bar" restriction is very, very narrow: Congress cannot force states to take unconstitutional actions.

These cases establish that the "independent constitutional bar" limitation on the spending power is not, as petitioner suggests, a prohibition on the indirect achievement of objectives which Congress is not empowered to achieve directly. Instead, we think that the language in our earlier opinions stands for the unexceptionable proposition that the power may not be used to induce the States to engage in activities that would themselves be unconstitutional. Thus, for example, a grant of federal funds conditioned on invidiously discriminatory state action or the infliction of cruel and unusual punishment would be an illegitimate exercise of the Congress' broad spending power. But no such claim can be or is made here. Were South Dakota to succumb to the blandishments offered by Congress and raise its drinking age to 21, the State's action in so doing would not violate the constitutional rights of anyone.

Would Section 602(c)(2)(A) run afoul of the "independent constitutional bar" doctrine? As defined by Dole, I doubt it. There is nothing unconstitutional about failing to reduce taxes. Still, it feels unsatisfying that Congress could use conditional spending programs to control a state's fiscal decisions–a core function of state sovereignty. These facts remind me of Coyle v. Smith (1911). In that case, Congress required Oklahoma to keep its capital in Guthrie, as a condition of statehood. Later, the state enacted a law to move the capital to Oklahoma City. The Court held that this federal law violated the so-called "equal footing doctrine." New states could not be treated worse than the original 13 states. In that opinion, the Court explained that this intrusion on state sovereignty, including its fiscal powers, was unconstitutional:

The power to locate its own seat of government and to determine when and how it shall be changed from one place to another, and to appropriate its own public funds for that purpose, are essentially and peculiarly state powers. That one of the original thirteen States could now be shorn of such powers by an act of Congress would not be for a moment entertained.

I need to give this position some more thought.

In addition to these four limitations, Dole identified a fifth factor: A condition becomes unconstitutional when "the financial inducement offered by Congress might be so coercive as to pass the point at which 'pressure turns into compulsion.'" Such coercion would, in effect, commandeer the state legislature to comply with the condition. In Dole, South Dakota would have only lost 5 percent of "certain federal highway funds." This incentive was "relatively mild encouragement." Therefore, the condition was constitutional.

In NFIB v. Sebelius, however, the Court found that the condition would run afoul of this fifth limitation. With the Medicaid Expansion, "pressure turn[ed] into compulsion." Chief Justice Roberts explained:

Spending Clause programs do not pose this danger when a State has a legitimate choice whether to accept the federal conditions in exchange for federal funds. In such a situation, state officials can fairly be held politically accountable for choosing to accept or refuse the federal offer. But when the State has no choice, the Federal Government can achieve its objectives without accountability, just as in New York and Printz. Indeed, this danger is heightened when Congress acts under the Spending Clause, because Congress can use that power to implement federal policy it could not impose directly under its enumerated powers.

How much money would the states have lost if they declined to expand Medicaid? The Chief observed that states could lose as much as 10% of their overall budgets:

Medicaid spending accounts for over 20 percent of the average State's total budget, with federal funds covering 50 to 83 percent of those costs . . . The threatened loss of over 10 percent of a State's overall budget, in contrast, is economic dragooning that leaves the States with no real option but to acquiesce in the Medicaid expansion. FN12

FN12 . . . More importantly, the size of the new financial burden imposed on a State is irrelevant in analyzing whether the State has been coerced into accepting that burden. "Your money or your life" is a coercive proposition, whether you have a single dollar in your pocket or $500.

Does the American Rescue Plan Act amount to "economic dragooning"? As a threshold matter, this law differs from NFIB in that states would not lose pre-existing funding. But states would be turning down significant sums of money. In NIFB, Arizona stood to lose about $8 billion for failing to expand Medicaid. A decade ago, that amount represented a quarter of the state's budget. According to the Tax Foundation, the American Rescue Plan Act provides Arizona with about $4.8 billion. Texas would stand to lose $16.5 billion. My quick googling suggests that Texas's annual budget is about $100 billion. If we take the percentages used in NFIB, Texas's loss could amount to "economic dragooning."

I'm sure we will hear far more about this provision.

NEXT: Short Circuit: A Roundup of Recent Federal Court Decisions

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  1. I don’t buy it. The compulsion of Sibelius wasn’t the deprivation of new money alone, but stripping a state’s current Medicaid recipients of funding. That could literally kill people who had reasonable expectations that they were insured, or make them sick.

    Whereas this statute just says you can’t give the new money away as tax cuts.

    1. As opposed to giving the money away as free health care?

      What is the difference? ALL state appropriations constitute “giving away” money…

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    2. The current law actually goes beyond that.

      It says you can’t do tax cuts, period.

      1. No it does’t.

        It says you can’t cut taxes IF you take this money.

        1. I think you think you made a point. But you didn’t.

          1. It says you can’t cut taxes WITH the money. In practice, that’s going to preclude a tax cut if a state takes the money, but it doesn’t preclude a state from, for instance, continuing to tax at last year’s rates if taxes were cut last year. Whereas the effect of the Medicaid expansion in Sibelius would have been to kick people off Medicaid entirely.

        2. It was implied.

      2. The law says you can’t use the federally-provided funds to directly or indirectly provide tax cuts. I’m not sure that equates to no tax cuts at all. It likely depends on how Yellen implements the law.

        1. Here’s the section. It’s really broad, since by definition this would “offset” a reduction in tax revenue.

          “A State or territory shall not use the funds provided under this section or transferred pursuant to section 603(c)(4) to either directly or indirectly offset a reduction in the net tax revenue of such State or territory resulting from a change in law, regulation, or administrative interpretation during the covered period that reduces any tax (by providing for a reduction in a rate, a rebate, a deduction, a credit, or otherwise) or delays the imposition of any tax or tax increase.”

          1. I think you have to read “directly or indirectly offset” as a single construct, which would imply not all tax cuts are necessarily covered. Only those that used the stimulus money to make up for the lost revenue would. Perhaps for example, if the state was running a surplus without the stimulus money, it could cut taxes by the amount of that surplus.

            1. Because money is fungible, all such actions would offset a reduction in net tax revenue.

              To use your example of a surplus. Let’s say a state is running a surplus of $100 million. They decide to accept this additional money. They then decide to cut taxes by $100 million. They have now reduced their net tax revenue by $100 million. The money received, would by its very nature, offset that reduction in tax revenue.

              1. It’s possible your viewpoint will be accepted. But, I think it is also within the statute to read it as I have (*). Time will tell per Yellen’s regulations and court cases.

                (*) We agree that even a state that runs a surplus without the stimulus money must spend the stimulus money. But under your reading, the state must also spend its existing surplus. That strikes me as very odd.

                1. *The state does not “have” to spend the money. In theory they could simply hold onto the money until 2025, then issue a very large tax rebate to all its citizens.

                  **Unless a second law was passed to the contrary in the 2021-2024 time peroid.

                  ***In such a time in which the ability to regulate “commerce between the states” mandates individual citizens are unable to grow wheat on their own property because that “might” affect interstate commerce, I find it exceedingly likely that any actions which lowered taxes would be considered to be offset by federal funds.

        2. Is there any reason a state can’t just send a check to its citizens per capita for the purpose of providing relief from the effects of covid rather than altering the tax code?

          1. That would qualify as a “rebate” which is specifically noted in the law.

  2. I think the ambiguity is pretty fatal. If you have to ask Janet Yellen ‘mother may I’ on every single fiscal decision you want to make which might conceivably reduce tax revenues, it’s ambiguous.

  3. “”How in the world would you cut your revenue during a pandemic and still need dollars?” Mr. Manchin said.”

    Because you’re trying to insulate your state economy against the damage from the federal government taking out of your economy the money it’s going to “give” you?

    1. You pick my pocket, and take from my wallet the money I was going to spend paying for this week’s groceries. Then you give my money back, with a condition attached that I can only spend it on what you dictate, and absolutely not on groceries.

      How am I supposed to eat?

      1. Nobody picked your pocket.

    2. How in the world can you pass a 1.9 trillion non-corna bill when there is still money laying around from the first “emergency” bill?

      (well, OK, I will use my check, but that’s different)

    3. Because you’re trying to insulate your state economy against the damage from the federal government taking out of your economy the money it’s going to “give” you?

      The federal government didn’t take any money out of the state economy. The damage to the states’ revenues is from the pandemic.

      1. No, it’s not. The states lost about $35 billion, and were given $350 billion in printed money to payoff Democrat public sector unions. Why can’t you pieces of shit stop fucking lying for five minutes?

        1. Why can’t you make an argument, even a bad one like this, without attacking and insulting people? If you are going to participate in someone’s blog, you should have the decency to follow the rules and requests of the blogger.

          1. Calling Bernard a “person” is an insult to humanity.

    4. A state can reasonably need money in Q2 2021, and have some spare money and be interested in a tax cut in Q3 2024 .

      -dk

  4. Brett, nobody raised your taxes to take away your grocery money. Giving you money is the opposite of taking money away. Use your accustomed grocery budget.

    Because you’re trying to insulate your state economy against the damage from the federal government taking out of your economy the money it’s going to “give” you?

    Speculative. Depends on happenstance. And on policy choices to be made later. For instance, if the Biden administration is right, then money distributed now will grow the economy as it comes back, and extra tax money from a bigger economy will enable future tax rate cuts instead of increases. Or, repeal of the Trump tax cuts for the rich could pay for the relief program, out of the pockets of people who will never have grocery problems.

    The courts shouldn’t make those policy decisions.

    1. Shouldn’t the states be able to make their own policy decisions? Like what their tax rate will be for the next 3 years?

      That’s a pretty big one.

      1. Yes, they should be free to do that. In considering what to do, states should stay mindful that their share of the relief money is contingent on not reducing taxes.

        The federal government, for its part, does not want Covid relief funds to be diverted instead to unrelated state tax cuts. It’s legitimate purpose is to be sure the money is used for Covid relief, both medical and economic.

        The federal government could choose to appropriate money for state tax relief, but it has not done so with this bill. So the states are not at liberty to pretend that it has, and use the money for an unappropriated purpose.

        See? Both sides are free to do as they prefer.

        1. “Yes, they should be free to do that. In considering what to do, states should stay mindful”

          Re Sebelius, that type of logic is too coercive, especially with such large monetary amounts. It basically allows the federal government to “force” states to do whatever the feds want, or else lose such massive amounts of funding that they essentially go bankrupt. It intrudes too far into the 10th amendment. It’s especially dubious when the activity banned (tax cuts) are also included en masse in the same bill.

          Trump tried this on much smaller scale with more targeted grants and sanctuary cities, and was shot down on constitutional grounds. Under your logic Trump (or another President) could demand the states use their police forces to remove illegal immigrants or else “lose” (not be granted) massive amounts of funding.

          Because of the scale of the coercion it’s likely unconstitutional. Making such policies constitutional would effectively eliminate any independence in the states.

          1. Re Sebelius, that type of logic is too coercive, especially with such large monetary amounts. It basically allows the federal government to “force” states to do whatever the feds want, or else lose such massive amounts of funding that they essentially go bankrupt.

            That’s crazy. No state was going bankrupt if this law didn’t pass. No state was even close to bankruptcy. There’s nothing equivalent to Obamacare’s kicking people off Medicaid if states didn’t accept the funds.

            1. Actually the numbers are quite equivalent.

              The threatened loss to the Medicaid budget was ~10% of many state’s entire budgets.

              The numbers here in terms of aid (IE, $16.5 billion to Texas, against a Texas budget of $100 Billion) is ~16.5% of Texas’s budget.

              1. The threatened loss in the Medicaid case was PEOPLE DYING BECAUSE THE STATE STRIPPED THEM OF THEIR HEALTH INSURANCE. Stop reducing people’s LIVES to nothing but a budgetary item.

                1. Your hysteria aside, people’s health insurance via Medicaid is a budgetary item. Health care does indeed, cost money. Paying for it, is important.

                  Now in Obamacare, one of the parts was the federal government threatened to take away the share of the money it pays for Medicaid in the states, unless the states did what they wanted to. This was a large chunk of many state’s budgets. If you want to object to Obama threatening people’s lives unless the states did what Obama wanted them to, I’m sure you could do that.

                  Luckily, the SCOTUS shot down that argument, and ruled that such massive amounts of money counted as coercion.

                  1. Armchair, the cases are not alike. With Obamacare and Medicaid, the threat was withdrawal of money states had become accustomed to and relied upon—money which indeed did play a critical role in healthcare.

                    In this case, the money in question is not in the states’ budgets at all. Without lifting a finger, states can reckon without it and maintain their budgetary status quo. Nothing will be disrupted. No one will suffer loss of anything except an opportunity cost inflicted upon them by state government. I’m surprised you need that mentioned to you.

                    More generally, a reversal on this question would dangerously alter the relationship between states and the federal government. Previously, there has never been a time when the federal government could not appropriate money for specific purposes which states were free to carry out. That is the very definition of pork-barrel spending. There has not even been a need to preserve equity among states in making such appropriations.

                    Your argument amounts to assertion that henceforth all federal money for states must come as no-strings-attached grants, with no other federal purpose at all for the appropriation. Right-wingers might suppose that would strip the federal government of power. More likely, it would make a federal government jealous of its budgetary power decide to undertake in-state spending on a strictly federal basis, with a consequent expansion of federal power and activity nationwide.

                    1. Stephen,

                      This has actually been an area of dispute under the Trump Administration, in regards to relatively small grants, which the Trump administration wanted to make contingent on revoking sanctuary city status from a number of area. This types of regulations, were in general, found to be not constitutitional.

                      Now we have a far larger program (~10-20% of entire state budgets) that “require” basic control over how a state can control its taxation policy for 4 years. (Specifically, they can’t institute any programs that lower net tax revenue). This is an “amazing” intrusion on state policy and independence. Far beyond the relatively minimal exercise over removing “sanctuary city” status from a number of areas.

                      Furthermore, you can easily imagine a situation where first the US government simply removes a great deal of funding from the states. Just in general. Which is of course, entirely legal. Then, in a separate bill promises to “restore” the funding in “exchange” for certain program choices by the states.

                2. Calm down Dylan, despite your hysteria of people dying in all caps, the Oregon Medicaid study showed Medicare coverage made no difference in physical health outcomes for the Medicaid eligible population:
                  “Approximately two years after the lottery, researchers found that Medicaid had no statistically significant impact on physical health measures, but “it did increase use of health care services, raise rates of diabetes detection and management, lower rates of depression, and reduce financial strain”

                  1. There’s been a lot of research since then that calls that into question.

                    And at any event, the idea that denying people promised health care is the same as refusing to spend money is ridiculous.

        2. Thr fact that you think a 1400 check is relief but a state deciding to let workers keep more of the money they earn isnt… well it says a ton about you.

          1. Turns out payments are a more effective stimulus than tax cuts.

            And better at relief, considering the different populations those two policies target.

            https://www.researchgate.net/publication/289112369_Tax_cuts_and_economic_stimulus_How_effective_are_the_alternatives

            1. Depends on the tax cut and how it is applied as to the target population and the efficacy of stimulus.

              But the policy “bans” all tax cuts by a state, no matter how it applied.

              Many states have sales tax holidays, for instance. Those that take this money may be banned from having such holidays.

              1. Wow — that would preclude increasing tax deductions/credits for child care, something that some Blue states are talking about doing. Likewise to state credits for electric vehicles, windmills and other snowflake things.

                It would not, however, preclude simply not spending the state tax revenue and letting the balance accumulate in Red state budgets. Nor preclude Red state Governors (and the GOP as a whole) telling their “we’d love to give you that money as a tax cut, but the evil Democratics won’t let us.”

                Bush ’43’ said that back in the 2000s and it had traction. Now imagine it being said in the midst of the 2022 election…

                Yep, that could cost the Dems the Congress…

                1. Exactly. It’s enormously broad, and a massive expansion of federal overreach to effective control over a state’s taxation policy.

                  But only so far as the feds decide to actually enforce the law. So, if they “choose” not to enforce it against a new green energy credit, that’s fine.

                  1. It’s enormously broad, and a massive expansion of federal overreach to effective control over a state’s taxation policy.

                    Not at all. If a tax cut IN 2021 is so important to a state, then I guess they don’t need revenue. And if they don’t need revenue, they don’t need to take federal aid.

                    This precludes one year of tax cuts, and allows states an out where they turn down the aid because they are so flush with revenue they can cut taxes. The interference with state sovereignty is minimal.

                    1. The law precludes using the federally-provided funds to finance tax cuts through 2024.

                    2. Or 2022. Or 2023. Or 2024….. So, it’s 4 years of tax cuts, or any policy AT ALL that would reduce taxes in any way.

                      Which is insane.

            2. There will always be some “study” to justify anything progressives already decided to do, no matter how obviously evil it is.

        3. Except its not really covid relief funds, because the states still have money sitting from the last stimulus! Very little of the total appropriated money in the so-called relief bill is actual covid relief.

    2. ” Giving you money is the opposite of taking money away”

      Where did the money come from, to give away? From the magic money tree that doesn’t create inflation or in any way incur any costs whatsoever?

      No, they take the money from you, then offer to give some of it back with conditions.

    3. So basically the tax-and-spend-into-oblivion states are getting desperate over the volume of taxable revenue (from both businesses and wage earners) pulling up stakes and moving to states with more fiscal discipline and correspondingly favorable tax treatment.

      When you can’t compete, turn to fiat legislation to disadvantage your competitors.

      1. No, because they aren’t prohibiting states from ever cutting their taxes. All they are doing is preventing a state from taking all this aid and then cutting taxes on the rich and giving all the money away that was supposed to help all the people.

        1. Except that’s not what the law says….

          This law would prevent, for example, sales tax holidays.

        2. Somebody holds a knife to your throat, and threatens to slit it if you do something, they’re not really prohibiting you from doing it, as such, because you always have the option of doing it and getting your throat slit.

          I’m saying this again: This money isn’t coming from the magic money tree. One way or another it’s coming from the states, then some of it is being returned with conditions.

          If they don’t accept the money back, it still leaves, and they take a big net hit to their economy.

          1. There is no knife to your throat.

            You guys are completely nuts. This is about money. Not violence. Not stripping people of health insurance (the issue in Sibelius). Just money.

            Again, if these states are so flush with revenue that they can afford a tax cut, they are flush enough with revenue that they don’t have to take this money.

            1. In regards to Sebelius, it was a question of money. Specifically the funding the federal government provided to the states in order for them to help pay for Medicaid.

              States represent their citizens. And many of the citizens in these states pay taxes. They could use a reduction in the tax rate (for example, the sales tax), which would help them greatly. As a state, it would be foolhardy not to accept “free money” and use it to help their citizens. Especially since at the end of the day, their citizens are the ones who will end up needing to repay the “free money”.

            2. Again, you’re analyzing this as though the money were magically appearing out of nowhere, totally free of any economic consequences.

              The money isn’t magically appearing out of nowhere. It’s being withdrawn from the general economy in ALL the states, obligating the citizens of all states, and handed back to the state governments that obey their orders. All states face reduced capacity to tax their own citizens due to the added economic costs of funding this program, only the states that knuckle under get compensatory funding.

              Stop analyzing this as though the funds were plucked from the magic money tree.

            3. We are the nation we are because of our strong dollar. This $2 trillion in printing weakens it.

            4. “Again, if these states are so flush with revenue that they can afford a tax cut, they are flush enough with revenue that they don’t have to take this money.”

              Maybe neither the states nor the taxpayers are flush with revenue?

        3. What about pandemic related tax cuts such as school choice tax credits because teachers unions have decided to make the children hostages to achieve union and political goals.

    4. “The courts shouldn’t make those policy decisions.”
      But Stephen, they do so all the time.

      1. Don Nico, what’s your point? I think separation of powers is a good thing. You don’t?

  5. I think, re Sebelius, this is probably unconstitutional.

    The Government can give states money. The Government can give states certain limited monies to do certain strict items, and put strings on it to make sure those items are done.

    But here, it’s a major amount of money, with a “string” that certain major items can’t be done (lowering taxes), even with the state’s own funds, and likely falls the Sebelius test. It basically dragoons the state, which such large % of the budget involved.

    Moreover, it’s somewhat counterintuitive to the law as a whole, since the Federal part has a large tax cut in it.

  6. The concept is that only the Federal government can give you free money or reduce your taxes, so you’ll look only to the Feds for any aid or tax relief. Pretty soon, the only government that can do anything is the National government. Progressive heaven.

    1. Right, they’re trying to recreate the Articles of Confederation, only inverted.

      The Articles produced a federal government that was toothless, because it was totally dependent on money the states gave it, and could (And did!) withhold.

      They aim to create a situation where the states are utterly toothless administrative districts that have to do whatever they’re told, because they’re utterly dependent on money from the federal government. And can’t get off the hook, because they’d still be taxed to fund the federal government even if they refused the money, and so freeing themselves from the trap would require double taxation.

      1. You are ignoring that state voters can elect people to Congress to reverse this if they find it so outrageous.

        1. No individual state can do that, so they do not, reasonably speaking, actually have any choice about taking the money. They’re already stuck with the consequences of the federal government raising the funds, their only choice is whether it’s all cost, or they get some of their money back.

        2. Yeah, and the “state voters” in places like Georgia includes those with 85 IQs. The founder of a successful business like Arthur Blank gets the same vote as a semi-retarded simian like Rayshard Brooks or Stacey Abrams.

  7. Does that give-away bill have severability?
    Can this be used to kill the whole thing and let our grandchildren avoid slavery?

    1. Don’t worry about anyone having to earn the money to pay it back. It won’t happen. Federal reserve will just buy the bonds and make them go away.

      It will be bad enough when the Feds can simply no longer borrow money. All the people addicted to free money will still demand it and all the people who actually do valuable work will decline to pay 50-85% of their income in taxes and buy guns instead.

    2. “let our grandchildren avoid slavery”

      Good to see Republicans remaining rational and level-headed in their loss of (a bit of) power. Should be a fun next four years.

  8. Though we can argue that Republicans aren’t wise about money, we can now state absolutely that the Left:

    1) Does not EVER want your taxes to be cut;
    2) Will NEVER cut government spending on anything;
    3) Will ONLY increase spending (and therefore taxes) on us.

    If you love pretending shizzat is free WHILE paying for it, you’ll love the Democrats.

    1. They won’t even raise taxes. They’ll just print the money until the dollar is worthless. I can’t wait, as that will usher in the civil war and cleansing we so desperately need.

  9. I think you may see the answer when some state decides to ignore this section. State takes the money, state spends the money, state cuts taxes, then what? The Feds demand the money back? State says “no, we’re keeping it”.

    Can the Feds force taxes back up? Maybe, but not likely for the reasons written in the essay. Can the Feds get their money back? How? Let the Feds try to impose a remedy within constitutional limitations. It won’t be easy.

    1. Part of the issue there is the risk involved.

      Would a state willingly pass a modest tax cut if they knew they were risking billions in revenue being withdrawn? That’s one heck of a risk. Which of course, is the point. It’s the “threat”

      Which is why the states should be able to challenge this law before making such a move. Now, the liberal judges who will defend the law will have an obvious out. “There’s not an injury, because no actual revenue has been withdrawn, so there’s no standing. Dismissed”.

      1. I would call that bluff.

        But if something in a law can’t be enforced within constitutional limits, that should help answer the question of whether the law is constitutional. It’s probably not constitutional.

  10. “By contrast, Section 602(c)(2) lists two categories of expenditures the funds cannot be used for. Section 602(c)(2)(B) addresses a common Republican criticism: the funds cannot be used to bail out pension funds.”

    So this restriction on state autonomy is okay, but the tax provision is bad?

    1. As money is fungible, how is the pension provision to be enforced?

  11. So, probably constitutional, then? Nothing you’ve said here persuasive makes the case that any of the five requirements are not satisfied here.

    The fact that the “penalty” in NFIB was the withdrawal of funding that states had previously been entitled to is not a difference-less distinction. It is what makes this whole body of law coherent. Because if the amount of new funding involved can itself be sufficiently large and rich to be unconstitutionally “coercive,” per se, you wouldn’t even be asking questions about the “strings.” You’d be creating a situation where the federal government can provide funding with strings, when the funding is small relative to state budgets, but can’t attach any strings whatsoever to larger grants. How does that further a dual-sovereign, federal system?

    The answer is: it doesn’t. It just happens to serve conservative interests in this particular case. Which means it has excellent chances before the current Court.

    1. “Which means it has excellent chances before the current Court.”

      Which means the current Court may soon change.

  12. It seems fine in light of 602(c)(1).

    There are three specific uses to which the money can be put, plus 602(c)(1)(C):

    for the provision of government services to the extent of the reduction in revenue of such State, territory, or Tribal government due to the COVID–19 public health emergency relative to revenues collected in the most recent full fiscal year of the State, territory, or Tribal government prior to the emergency;

    So, the money can be used to replace any shortfall in state revenues due to the pandemic. The only way to give that effect is to say that you can’t deliberately reduce revenues. It’s a response to the pandemic.

    Without such a restriction the federal government could never give general assistance to a state to make up for such a shortfall.

  13. Yellen is a disgusting pig who is a far left liberal but pretends to be an economist.

  14. Dems can never answer that if we can just print money to solve all of our problems, why stop at $1.9 trillion?

    And yes, we’re printing it, because the market would demand far higher rates than 1.6% for 10 years, so the only way to raise the money is for the Fed to monetize the debt.

  15. The law’s clearly structured to allow direct aid. Just make transfer payments as a percentage of income, or something. They law’s just designed to prevent legislators from calling a policy a tax cut.

    1. I don’t really understand Sen. Manchin’s argument. Why couldn’t a state decide that the best Covid relief would be a state income tax cut, and that could be accomplished using this money? And if a state did that, why does Manchin care? If Congress is so convinced that direct payments to people is the best form of relief, why is it giving state governments any money at all?

      1. I’m guessing Manchin believes functions funded by the states need to be met before money is paid directly to people.

  16. Wow. This law is retroactive all the way back to 2014….

    1. If states accept the money, all tax cuts between December 2014 and the passage of the bill will have to be reversed! Going to cost citizens a lot of money.

  17. Thanks to the Anti-Injunction Act, it will be difficult for anybody outside the Justice Department to enforce this law. Taxpayers will need to raise challenges on an individual basis through the administrative and judicial machinery of their own states. No federal class action and statewide injunction.

  18. It’s not a tax cut. It’s a reduction in the rate that is predicted to increase total revenue by attracting new residents and businesses. So, really it’s a tax increase.

    Therefore none of this money will be needed for offsets. Therefore the new tax rate complies with ARP.

    This isn’t hard.

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