NTUF Files Amicus Briefs in ARPA Tax Cut Ban Cases

This week, National Taxpayers Union Foundation filed briefs in two cases challenging President Biden’s American Rescue Plan Act (ARPA) provision prohibiting states from cutting taxes, arguing that the restriction is an unconstitutional intrusive condition on state governments and so ambiguous that enforcement will be arbitrary.

The provision bans states from using ARPA funds, directly or indirectly, to “offset reductions in net tax revenue,” and since ARPA’s passage in March, multiple states have filed suit to challenge the provision. On Wednesday, NTUF’s Vice President of Tax Policy and Litigation Joe Bishop-Henchman filed two Amicus Curiae briefs: one in the United States Court of Appeals for the 8th Circuit supporting Missouri’s challenge, and one in the United States District Court for the Eastern District of Kentucky, supporting Kentucky and Tennessee’s challenge.

He writes:

Under the Treasury’s framework, each of these states must now provide evidence in the form of a report to the Treasury Department that the tax cuts were “paid for” by other than federal funds; if persuasive evidence does not exist or is not presented, Treasury says they will recoup the funds. In contemplating these state-level enactments, these states had to and have to consider this pending federal intervention and the lack of clarity as to what is permissible and what is impermissible, and this in turn has had a chilling effect in deterring support for state tax cuts or reducing their size. Taxpayers deserve better.

In the Missouri case, a lower court judge found for the federal government, holding that Missouri had not demonstrated how it could be harmed by the provision. NTUF’s brief explains how state challenges to conditions on federal funds have never been dismissed before in such a manner. In fact, an earlier lawsuit by the state of Ohio—for which NTUF filed another amicus brief—ended with a federal judge granting Ohio a permanent injunction barring Treasury from enforcing the clawback provision against the state. 

NTUF has amicus briefs in ARPA cases brought by Missouri, Arizona, West Virginia, and Kentucky, as well as writing a letter to Treasury Secretary Janet Yellen asking for clarification on the matter. It is likely that the issue of how far Congress can go on attaching vague conditions to federal funds will ultimately reach the U.S. Supreme Court.

To discuss the cases and the NTUF amicus briefs with Joe Bishop-Henchman, please contact Kevin Glass, NTUF Vice President of Communications, at 703-299-8670 or at kglass@ntu.org.