Ohio AG sues over COVID relief tax mandate
Ohio Attorney General Dave Yost sued the federal government Wednesday over provisions in the latest coronavirus relief package that prevent local governments from using the aid to pay for tax cuts.
Ohio is in line to receive about $5.6 billion – that represents about 7.4% of total state spending in the last fiscal year – from the American Rescue Plan Act, which was signed into law by President
Joe Biden last week.
However, states that accept funding under the latest relief package cannot use those dollars to cut taxes.
“It basically mandates that the states maintain their existing tax structure during the pendency of this spending bill,” Yost said in an interview. “That's fundamentally unconstitutional… There's nowhere in which the federal government has the right to dictate tax policy to a state.”
The filing Wednesday came a couple of days after Republican attorneys general in 21 other states sent U.S. Treasury
Secretary Janet Yellen and other treasury officials a letter voicing concern about the tax provision.
Yost, a Republican, did not sign the letter, however, saying Wednesday that he did not need clarification about the constitutionality of the tax provision included in the relief package.
Attorneys for the state argue the restrictions are unconstitutional and a "metaphorical ‘gun to the head'" for states.
“... (States) can have either the badly needed federal funds or their sovereign authority to set state tax policy,” attorneys wrote in the motion filed in U.S. District Court for the Southern District of Ohio. “But they cannot have both. In our current economic crisis, that is no choice at all.”
The relief package refers to moves that may "directly or indirectly" lead to decreases in tax revenues. That language could ultimately affect tax abatements or other policy decisions that lead to less in tax collections.
And there's clawback language, enabling the federal government to recoup
pandemic relief to states that break the tax mandate.
“We could be down the road, it could be 2023, the money was received and spent and they think that we reduced the tax burden in some way, directly or indirectly,” Yost said. “They could come back and say, OK, you owe us money, pay up, and they could just take it out of other money the federal government won’t sent us. That’s a huge danger to us.”
A message was left seeking comment from treasury officials. mkovac@dispatch.com @Ohiocapitalblog