Attorneys general from 13 states sued the Biden administration this week over a key element of the recently enacted $1.9 trillion coronavirus relief law that prevents states from using government aid to lower taxes.
The lawsuit, filed in a U.S. District Court in Alabama, asks judges to strike down a provision in the American Rescue Plan that bars state governments from using the roughly $195 billion in federal funding “to either directly or indirectly offset a reduction in the net tax revenue.” The restriction could apply through 2024.
“Never before has the federal government attempted such a complete takeover of state finances,” West Virginia Attorney General Steve Morrisey, who co-led the lawsuit alongside Alabama and Arkansas, said in a statement. “We cannot stand for such overreach.”
The suit comes just two weeks after 21 attorneys general sent a letter to Treasury Secretary Janet Yellen — who is named in the new lawsuit — inquiring how the administration planned to interpret the law. For instance, they wondered whether states will be prohibited from cutting taxes for any reason, even