Even though President Joe Biden just signed the American Rescue Plan, Republicans are not backing down in their fight against the $1.9 trillion Covid relief package. They are now looking for ways to reject the federal funds allotted to state and local governments.
On Tuesday, twenty-one attorneys general penned a condemnatory missive protesting a stipulation in Biden’s relief package that imposes limits on states’ ability to lower taxes. The letter, a noteworthy counterpunch against Biden’s defining legislative victory, specifically takes issue with the $350 billion set aside for cities and counties struggling to front the cost of the pandemic. Congressional Democrats drafting the bill barred state officials from using this money to offset any losses of tax revenue that would come from local cuts. However, the attorneys general said in their letter to the Treasury Department that the provision prevents states that were already pursuing “such tax relief with or without the prospect of COVID-19 relief funds.”
The letter continued, “Absent a more sensible interpretation from your department, this provision would amount to an unprecedented and unconstitutional intrusion on the separate sovereignty of the states through federal usurpation of essentially one half of the state’s fiscal ledgers.”
If Biden does not allow states to carry out tax cuts on their own volition, then the relief law, the GOP letter argues, “would represent the greatest invasion of state sovereignty by Congress in the history of our Republic.”
According to The Washington Post, whispers of impending lawsuits have circulated the White House.
One official noted, however, that the relief bill does not explicitly restrict states from enacting cuts, but, rather, instructs them not to offset lost net revenue from tax cuts with the aid. The official explained that “if a state does cut taxes without replacing that revenue in some other way, then the state must pay back to the federal government pandemic relief funds up to the amount of the lost revenue.”
In Oklahoma — a state which has already passed an earned income tax cut — the state’s attorney general expressed dismay that the “the federal stimulus bill might prohibit Oklahoma from providing this economic relief without losing its share of federal funding.”
“We were planning on… reducing the sales tax on used cars, that is low-income and middle-income,” Republican Gov. Asa Hutchinson of Arkansas said in a CBS interview. “And now we’re worried about whether that’s going to be prohibited under this bill. The language seems to indicate it is.”
The provision, which has drawn great confusion within the legal right, may prove a difficult hiccup in getting states run by Republicans the financial support their residents need.
The state officials’ letter comes as another Republican-backed effort against the bill mounts in Mississippi. The Magnolia State Governor, Tate Reeves, R, signaled on Sunday that he would not expand the state’s Medicaid program, even though doing so would qualify the state for a 15 percent match in funding.
Under the Affordable Care Act, states already receive 90% of the cost of Medicare expansion. However, as Vox notes: “[N]ewly expanding states would also receive a 5 percent bump in the federal funding match for their traditional Medicaid programs for two years. Because the traditional Medicaid population is significantly larger than the expansion population, the funding bump is projected to cover a state’s 10 percent match for expansion enrollees and then some over those two years.”
This means that Mississippi — home to somewhere between 200,000 to 300,000 uninsured residents — would qualify for an aggregated 105% match for the cost of coverage, effectively subjecting the state to a 5 percent loss if it opts out of the expansion. As Senate Public Health Committee Chair Hob Bryan, D, put in an interview with Mississippi Today, that there “will be more money in the state treasury if we expand Medicaid than if we don’t.”
“For a number of years, the federal government has been offering us $1 million a day to take care of sick people,” he added, “Now they are offering $1 million a day to take that other $1 million a day. You can’t make this stuff up.”
Asked whether he would expand Medicaid with the promise of additional funding, Reeves said in a press conference that his position had not changed.
President Biden’s relief bill may prove to be a campaign flash point in the upcoming Senate races as Republicans and Democrats remain split over the bill’s political value. Many Democrats have vowed to campaign on the bill, now knowing that their negligence of this tactic contributed to widespread Democratic losses after Obamacare’s historic passage. “We didn’t adequately explain what we had done,” Biden told House Democrats after the relief bill’s passage. “Barack was so modest, he didn’t want to take, as he said, a ‘victory lap.'”
Rep. Sara Jacobs, D-Calif., told The New York Times that Democrats have “learned the lessons from 2009, we made sure we went back to our districts this weekend to tell people how much help they were going to get from this bill.”
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