STATES WANT MONEY FOR TAX CUTS

States want money for tax cuts. The Republican attorney general of 21 states recently called one aspect of the new coronavirus recovery bill “an unprecedented and unconstitutional intrusion on the separate sovereignty of the States through federal usurpation.” In fact, they said it was “the greatest attempted invasion of state sovereignty by Congress in the history of our Republic. Ohio’s attorney general then filed suit against the federal government. What was this outlandish violation ? It was a condition placed on a provision granting states and local governments a substantial amount of new fiscal relief–$350 billion to help offset the costs of responding to the pandemic and related economic crisis. The money is supposed to be used to make schools safe to reopen, provide hazard pay to exposed front line workers and stave off evictions and foreclosures. But the attorney’s general are outraged that Congress has stipulated that fiscal relief money not go instead to offset state tax cuts. This kind of restriction might seem like common sense to some people: Just as Congress does not allow states to spend federal Medicaid dollars building marinas to the districts of powerful state legislators, so it is insisting that this aid money be used for its intended purpose, to help the people. States want money for tax cuts.

To be clear, if states want to enact tax cuts, they can–and they may still receive federal aid. But in that case, the law reduces the amount of aid by the amount of the state tax cut. The logic is straightforward: If a state has sufficient revenue that it can afford a tax cut, it does not need more federal money. Unsurprisingly, the states argument is beyond flimsy. Nothing in the constitution entitles the states to transfers of federal funds. (Indeed, congressional Republicans and President Trump spent the final nine months of last year arguing that no such aid was necessary). And when Congress does grant aid, nothing in the Constitution prohibits legislators from imposing significant conditions on its use.