State Watch

Ohio AG sues Biden administration over pandemic bill

Ohio’s attorney general filed a lawsuit against the Biden administration on Wednesday over a provision of the recently signed pandemic relief bill.

In a complaint filed in federal district court in Ohio, Ohio Attorney General Dave Yost (R) challenged a provision in the legislation that forbids state and local government from using pandemic aid to offset tax cuts.

“Ohio seeks to enjoin federal officials from enforcing the unconstitutional Tax Mandate, and seeks declaratory relief establishing that the State of Ohio, under the Tenth Amendment to the U.S. Constitution, retains the freedom to manage its own tax policy,” the lawsuit reads.

The lawsuit was filed against Treasury Secretary Janet Yellen and the Treasury Department. Neither the White House nor the Treasury Department immediately responded when asked for comment.

President Biden signed the bill last week, authorizing aid including direct payments for individuals and $195.3 billion for states and Washington, D.C. — including about $5.5 billion for Ohio, according to the lawsuit.

The aid is largely distributed based on each state’s number of unemployed workers.

Yost argues in his lawsuit that Congress violated constitutional restraints in seeking to control how states set their tax policies.

“By accepting that money, the State must sacrifice its sovereign authority to set tax policy as it sees fit, because changes to tax policy that reduce revenues violate the Tax Mandate,” the lawsuit reads. “Such violations could be used to force the State to return funding received through the Act.”

The provision has drawn ire from conservative state officials concerned that it will get in the way of future efforts to cut taxes.

Yost was not among a group of 21 Republican state attorneys general who sent a letter to Yellen this week expressing concern about the mandate, saying it would “represent the greatest attempted invasion of state sovereignty by Congress in the history of our Republic.” 

Carl Davis, the research director for the left-leaning Institute on Taxation and Economic Policy, said that the rhetoric from the conservative attorneys general has been overblown.

“There’s a lot of potential very positive uses for this money that states and localities could find in this moment,” Davis told The Hill. “It’s not intended to be a way to help states to go ahead and cut taxes, particularly for folks at the top, which is really what we’re talking about in a lot of these states that are objecting most loudly to the provision.”

“So I think if a state believes that its budget is so strong, and it can afford to actually cut taxes and it’s not going to be doing those kinds of investments, dealing with the economic situation of the hardship we’re seeing right now, it would forego an equivalent amount of aid,” he added.

Daniel Hemel, a tax law professor at the University of Chicago law school, agrees that the rhetoric from the attorneys general has been overblown but says that the tax provision in the relief bill is not “Congress’s best work.” Hemel says that a lawsuit like Yost’s could have merit if Yellen were to adopt a maximalist approach to enforcing the law, but that the state attorney general should have waited to see how Biden’s Treasury Department would decide to implement it.

“Attorney General Yost is arguing against a phantom,” Hemel said. “Will he beat the phantom? Well, maybe, if Secretary Yellen came up with an unreasonable interpretation of the provision, that interpretation would be unconstitutional. But you would think that he would wait until at least she had a few weeks to say something before running off to court.”

—Updated at 4:34 p.m.

Tags Coronavirus COVID-19. Janet Yellen Joe Biden Ohio
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