The ban, which was added by the Senate Democrats, prompted Ohio’s attorney general to file a lawsuit Wednesday and ask his G.O.P. Allies were asked to write an offensive letter to Treasury Secretary Janet Yellen.
The rule could apply until 2024, which is the deadline for states to use their aid.
The Treasury Department said Thursday that the relief aid is not to reduce taxes, but that states are free to use other money for lower recovery.
Democrats sought to add 150 150 billion to the pot provided in the stimulus deal passed a year ago, but Republicans will successfully block it when they take control of the Senate in 2020.
Claiming an unconstitutional tax order
Ohio Attorney General Dave Yost filed a U.S. District Court in Southern Ohio’s restraining order seeking a ban on the execution of what he calls a “tax order,” saying it is unconstitutional and beyond the power of Congress.
“The tax mandate gives states a choice: they may have poorly funded federal funds or their sovereign right to determine the state’s tax policy. But they may not have both,” the proposal said. “In our current economic crisis, it’s not an option. It’s a metaphor ‘gun to the head’.”
Meanwhile, a coalition of 21 Republican attorney generals, led by Georgia, Arizona and West Virginia, wrote a letter to Treasury Secretary Janet Yellen on Tuesday, specifically to “indirectly” set a provision on the ban and the list of prohibited tax cuts.
The letter includes a series of tax moves, with states currently considering whether officials are concerned that the relief legislation will work. These include raising standard deductions in Georgia, imposing tax credits in Indiana, and cutting income taxes in Montana.
The attorney general told Yellen to confirm that the relief package prevents states from explicitly using the funds for direct tax cuts rather than the listed objectives.
What states can do, according to the Treasury
The Treasury Department said the law does not prohibit states from reducing taxes or repaying their aid if they do.
“In other words, states are free to make policy decisions on tax cuts – they cannot use epidemic relief funds to pay for tax cuts,” an agency spokesman said.
However, the Biden administration made it clear earlier this week that the aid was meant to prevent states from firing more workers – especially essential workers. State and local governments have cut about 1.4 million jobs in the last 12 months.
White House Press Secretary Jane Sasaki said in a briefing Monday that the original purpose of state and local funding was to hire police, firefighters, and other essential personnel and was not intended to reduce taxes.
Yost was not satisfied with the Treasury Department’s response.
“It’s like saying ‘but you’re free to keep your let, it’s your choice,'” the attorney general said Thursday, after the crocodiles said “your let or your life.”
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