Attorney General Knudsen Joins 13-State Coalition Suing Biden Treasury Dept. to Protect State Tax Cuts
HELENA — Montana Attorney General Austin Knudsen joined a bipartisan 13-state coalition in filing suit Wednesday to protect the well-established authority of states to lower taxes for their citizens from being violated by the “American Rescue Plan Act of 2021” (ARPA).
U.S. Treasury officials cannot force states to relinquish control of their taxing authority in return for the federal dollars that Congress appropriated in ARPA. The Federal Tax Mandate, housed in §9901 of ARPA, is “one of the most egregious power grabs by the federal government in the nation’s history,” the lawsuit states.
“While Joe Biden is proposing trillions in wasteful spending, it’s a slap in the face to Montana – where we balance our budget each year – to tell our legislature they can’t provide tax relief or additional education tax credits,” Attorney General Austin Knudsen said. “Similarly, Senator Tester can’t sit in Washington, DC and use federal legislation to block tax cuts for Montana families.”
Senator Jon Tester voted for ARPA. Montana’s Senator Steve Daines and House Representative Matt Rosendale opposed it.
The bipartisan coalition of attorneys general argue that ARPA’s federal tax mandate could be used to claw back a share of a state’s stimulus allotment. This creates an impermissible chilling effect on state lawmakers’ willingness to reduce the tax burdens on their citizens.
For instance, uncertainty remains in the state legislature surrounding an income tax cut and increased education tax credit for Montana families that were proposed even before ARPA was a glimmer in Joe Biden’s eye.
Members of the coalition sought to avoid litigation by asking U.S. Treasury Secretary Janet Yellen to confirm the legislation would not “strip States of their core sovereign authority to enact and implement basic tax policy.” Yellen’s response, however, failed to place limits on the vague provision. The secretary admitted this uncertainty exists, referring to it as a “thorny” issue in testimony to Congress.
Attorneys general filed the lawsuit against the U.S. Department of Treasury Secretary Yellen and the department’s Acting Inspector General Richard K. Delmar, who would be responsible for seeking any potential claw back of federal funds.
The lawsuit sets forth charges of yet another unconstitutional exercise of federal power by the Biden administration. Specifically, in this case, the Biden administration violated the Tenth Amendment, the conditional spending doctrine, and the anti-commandeering doctrine.
The attorneys general seek a court order that prohibits enforcement of the federal tax mandate and declares it unconstitutional.
In addition to Montana, Alabama, Alaska, Arkansas, Florida, Iowa, Kansas, Montana, New Hampshire, Oklahoma, South Carolina, South Dakota, Utah, and West Virginia are plaintiffs in the lawsuit.
The lawsuit was filed in U.S. District Court for the Northern District of Alabama. Read a copy here.