• October 4, 2023

Opinion: Democrats to States: No New Tax Cuts

Senate Majority Leader Chuck Schumer holds a press conference on the COVID relief and rescue package, which was passed by the Senate in New York on March 7th.


Lev Radin / Zuma Press

Democrats in Congress are not satisfied with spending $ 1.9 trillion to help blue states and union friends. They also launched a sneak attack against conservative states. Read the lips of their legislation: No new government tax cuts.

That’s the news from a provision added by Senate Democrats last week that restricts how states and municipalities can leverage their $ 360 billion in profits. States can use the loot to provide government services, cover lost revenue during the pandemic, and “respond to the public health emergency” or “its negative economic impact, including helping households, small businesses and nonprofits, or help for affected industries such as tourism, travel and hospitality. “

Much of the relief will all go to state pension funds that are underfunded in states like Illinois, New Jersey, and Connecticut. In order to vaccinate against GOP attacks, the Democrats have stipulated in the bill that aid money may not be used “to pay into a pension fund”. But money is fungible. States can use their general funds to pay for pensions and use the federal money for something else.

Majority Leader Chuck Schumer also included a provision in his “Perfection Amendment” that allows states to use federal funds to provide a “bonus” of up to $ 13 an hour (and in total) workers doing “such essential work” 25,000 USD) granted by the governor of each state.

But here is the political gut blow. The bill expressly forbids states to lower taxes. The states “may not use the funds either directly or indirectly,” says the bill [our emphasis] compensate for a decrease in net tax revenue resulting from a change in law, regulation or administrative interpretation during the Covered Period that reduces taxes (by reducing a tax rate, discount, deduction, credit, or otherwise) or delaying it the collection of taxes or tax increases. ”

Impressive. Washington Democrats are trying to dictate governors and lawmakers not to change their tax laws if they accept their share of the $ 1.9 trillion. The sweeping ban would last until 2024, and the bill gives Treasury Secretary Janet Yellen the power to make regulations “necessary or appropriate to enforce”.

The language is so extensive that states may not be able to make changes to their tax codes that reduce revenue, even if they don’t use federal funds as direct compensation. Much will depend on how Ms. Yellen defines “indirect”. States that do not agree with their interpretation have to repay federal funds.

Several states, including West Virginia, Mississippi, Arkansas, and Idaho, are considering tax cuts to attract people and businesses. Some GOP lawmakers also want to start or expand private school selection programs that provide tax credits to businesses and individuals who donate money for scholarships. The Treasury Department could say these guidelines are against the law. Beltway Democrats essentially prevent the GOP-led states from improving their competitiveness against democratic states with high taxes.

California Democrats recently approved $ 600 grants for low-income residents and undocumented immigrants, and these and other Liberal constituency leaflets appear to be eligible under the law as “Household Aid”. A corporate tax cut? Under no circumstance.

The constitutionality is questionable. The Supreme Court’s “anti-commandering” doctrine forbids Congress from using federal funds to coerce states. But even if the tax cut ban does not pass the legal compulsory test of the Court of Justice, it is still a tremendous affront to constitutional federalism. In the 2020 election, the Democrats missed their goal of retaking state houses, but now they plan to control them from Washington anyway.

Journal Editorial Report: Senate Democrats skip bipartisanism, pass bill. Image: Samuel Corum / Getty Images

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Published in the print edition on March 10, 2021.

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