NTUF Asks Supreme Court to Hear ARPA Tax Cut Ban Case

NTUF’s Taxpayer Defense Center is back in court this week challenging the American Rescue Plan Act’s (ARPA) provision that bans state tax cuts if states take billions of dollars in state aid. This time, the Taxpayer Defense Center is asking the Supreme Court to hear Missouri’s case that it has standing to sue the Biden Administration over the provision.

ARPA has a condition attached to the $200 billion in aid given to state and local governments during Covid. Accepting the aid comes with an ambiguous condition that states must agree to not use the funds directly or “indirectly” to cut taxes for five years. NTUF has argued in numerous briefs that the provision restricts state sovereignty and violates the Tenth Amendment.

Ever since the provision passed, the Biden Administration has been getting sued all around the country. In total, there are six lawsuits filed by groups of states. Of these six, courts in four of them have declared the provision to be unconstitutional and two were dismissed on procedural grounds that the states challenging the law did not have legal authority to sue the federal government.

The Missouri case was one of the two that was dismissed on standing grounds. It is the first ARPA case to reach the Supreme Court, and NTUF filed a brief this week asking the Supreme Court to hear the case.

In its amicus curiae (“friend of the court”) brief, NTUF argues that when states’ budgets are being threatened by federal government requirements, states are being harmed and therefore have the legal standing to challenge the federal law. States suffer concrete harm when they cannot decide what tax cuts they can pass because nobody knows what cutting taxes “indirectly” means.

This is vitally important as taxpayers do not have standing to challenge poor government spending decisions in federal court. So, the states protecting their prerogatives to set their own tax rates is a key defense of protecting taxpayer rights. Does ARPA ban all state tax cuts? Does it mean states can cut taxes but only on the condition of surrendering the aid amount dollar-for-dollar for the tax cut? Does it mean states can cut taxes and not have to surrender federal aid so long as revenue is replaced by other funds? Nobody knows, which is why states can sue because the Tenth amendment requires that conditions attached to federal grants must be clear.

If states cannot sue over a federal law’s requirements on how to use federal funds, then nobody can, and the provision will be allowed to stand without ever a hearing on if it is constitutional.

It is also important for the Supreme Court to hear the case to clarify that states can sue if similar provisions are passed in the future. Currently, the Ninth Circuit and numerous district courts around the country have ruled that states can challenge the ARPA provision, while the Eighth Circuit in this case says Missouri cannot. The government cannot function if some states are able to preemptively challenge the conditions included in federal grants but not others.

NTUF hopes the Supreme Court will grant certiorari in this case and hear arguments this term. One way or another, an ARPA case is getting to the Supreme Court. The Court should hear one now rather than wait.