STATES CANNOT USE AID FOR TAX CUTS
April 15, 2021 - Douglas Myser
States cannot use aid for tax cuts. After large stimulus measures were passed by Congress, several Republican Attorney General's filed suit to try to allow those particular states to use the money to implement tax cuts. One of the arguments used was the "sovereignty" argument. This is a different form of the "sovereignty" argument. Ohio is one of the states filing suit, and if Ohio's suit were successful the result would be that it would end up shifting responsibility for paying for essential programs from the state itself to the federal government. That's hardly a recipe for state independence. Our current system of "fiscal federalism" arose during the New Deal. With states finances on the brink of collapse because high unemployment produced less tax revenue, the Federal Government offered funding to maintain a range of essential functions, caring for destitute seniors to building and maintaining infrastructure. States cannot use aid for tax cuts.
Describing this history, Chief Justice Rehnquist wrote in a 1987 case involving whether the government could withhold federal highway funds form states that did not raise the drinking age to 21, that "Congress may attach conditions on the receipt of federal funds and has repeatedly employed the power to further broad policy objectives by conditioning receipt of federal money upon compliance with directives". The Court has imposed some limits on the conditions Congress may impose on grants to states. But the Court also said that Congress could have conditioned a new disbursement of money on such a change in policy. Clearly, the condition that the attorney's general are complaining about today applies to a new stream of money. The Court has set out some guidelines for how conditional grants should work and the conditions must be readily apparent on the face of the legislation, so that states can decide whether to accept the grant or not. The fact that intense controversy arose mere days after the recovery plan's signing shows how transparent the condition is. In the present instance, the tie between the purpose and the condition could hardly be clearer.
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