• February 4, 2023

States Fight the Tax-Cut Ban

After the price tag and advancing ambition, the most important feature of the new democratic agenda is how it seeks to shift central policy-making powers from state lawmakers to Washington. The House of Representatives has already passed a law that would federalize electoral rules and another that would repeal state union membership laws on the right to work. The Covid Act, which is now the law of the country, contains unprecedented controls over states’ ability to set tax policies.

Ohio recently challenged tax cut restrictions in federal court, and 13 more states followed on Wednesday, led by West Virginia attorney general Patrick Morrisey. The challenges are worth watching for their economic ramifications – and because they preview how the judicial system might mediate the contradictions between constitutional federalism and the new progressive juggernaut.

The US bailout bill distributes $ 350 billion to state and local governments, but includes a provision that states cannot use the funds to “directly or indirectly offset” tax cuts. What this means in practice is unclear – and the new lawsuit argued The language “is either impermissible abroad, impermissibly vague or both.”

The Supreme Court’s anti-commandering doctrine severely limits the extent to which Congress can rely on states to implement its preferred policies. There’s a simple little democratic reason for that: voters need to know who to blame or blame for the laws they live under. The letter cites a 2018 Supreme Court ruling: “If a state imposes regulations only because Congress has ordered it to do so, responsibility becomes blurred.” That puts sand in the gears of the federal system.

The lawsuit also states that Washington’s funds are too significant for states to reasonably reject or raise for themselves. West Virginia accounts for a quarter of 2021 sales. It is 21% for Alabama and 29% for Arkansas. “This forced ‘election’ – whether federal aid should be accepted after an economic shock -” orders the states to pursue tax policy regulations in the interests of Congress and not their voters, “the lawsuit said.

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