The reaction of Republican-led state governments to this provision suggests that the suspicions of their detractors hit the bullseye. On Tuesday, 21 Republican attorney generals (yes, I know it’s “attorneys general,” I’m spelling it this way out of raw spite) threatened to sue the Biden administration over the rule stipulating they can’t use the funds to cut taxes, and on Wednesday Ohio’s Republican attorney general followed through on those threats.
The charge is that telling states how to use the $350 billion worth of federal funding is “unconstitutional.” It’s plainly not: The federal government imposes rules on how federal funds are to be spent Literally All The Time. But the Republican argument is that because the mandate bars using the $350 billion to cut taxes even indirectly, as in by offsetting the fiscal effects of a tax cut the state would otherwise have not undertaken, it is unconstitutionally broad. What if we had planned to cut taxes soon but hadn’t done it yet? Does that mean we can’t cut taxes at all?
And so on. This means states cannot change tax policies at all, during the period they accept this funding, and therefore it violates the Tenth Amendment ‘n federalism ‘n stuff.
Again, this isn’t strictly true. All a state has to do to both cut taxes and take the federal relief cash is identify, when cutting taxes, where the money will be coming from. If it comes from some other identifiable offset, fine. It just can’t use this as its offset. The only place where the stipulation would foul state government plans is if state Republicans cut taxes while giving no plausible explanation as to how the resulting state budget hole would be filled.
What’s that? They do that all the time? Ah. Well now, there’s our problem.
After campaigning vigorously against providing any money to pandemic-ravaged states at all, calling it a “bailout” of poorly run “Democrat” states, Republican states are now bristling that they can’t use the funds as bailout of their own. Any Republican policy that is not specifically racist (or, these days, fascist), is devoted to cancelling as many government services as possible, using tax cuts to create the budget crises justifying the cuts. It is The Gimmick.
The provision in the pandemic-focused American Rescue Plan threatens to put special focus on the Republican practice of cutting taxes to induce deficits, if only because it temporarily may require those tax cuts to stipulate just how the drafters intend to make up the lost revenue. Since Republican state lawmakers don’t particularly want to explain to their constituents the specifics of just what will next be getting damaged by each tax cut for corporations and the rich, those tradeoffs typically being profoundly unpopular, they are Extremely Peeved here.
Why these Republican states do not instead simply decline the federal funds—after a year of their lawmakers insisting that no such funds are needed and that the pandemic’s severity is merely a hoax—is unclear.
It is possible that Biden administration officials may be able to come to some compromise here, with rules detailed enough to satisfy state leaders that their ability to cut taxes remains intact if that is what they insist on doing and can indeed prove federal pandemic funding wasn’t the means of financing it. The Washington Post notes some examples of reasonable confusion as to what might or might not run afoul of the law, all of which would seem straightforward to sort out.
It’s equally possible, though, that many Republican lawmakers truly did expect to use the pandemic funds as giveaway to important constituents, and are ticked that federal lawmakers foresaw the move and headed it off.
A reasonably likely outcome, then, is that this one gets decided by the newly archconservative Supreme Court. Since that court is essentially nonfunctional, in that the majority decides each case near-solely based on whether allied Republicans will be hurt or helped by any single decision, it is plausible that the majority will decide Republicans are allowed to use federal funds in ways the federal government specifically forbade because screw you, that’s why.
But it should go without saying that Republican “tax cuts” as means of fighting the COVID-19 pandemic is not intended as plausible antiviral policy, any more than it was plausible growth policy or plausible deficit policy. Democratic tax policies keep running circles around Republican ones, when it comes to either providing the most relief or the most economic growth, and it is because the Republican versions remain devoted to an alleged “trickle-down” from rich to poor that has now been tested, ad nauseam, and proven fraudulent.
Indeed, the same Republicans who spat vitriol about the American Rescue Plan during its passage have been lining up to claim credit now that it’s passed and providing actual state rescue. That’s another reason Republican-state lawmakers have no intention of solving their little problem by refusing the provided federal dollars and calling it done: Republicans have already been bragging to constituents that the relief they so angrily opposed is now on the way.