The National Taxpayers Union Foundation’s Taxpayer Defense Center says that American Rescue Plan Act of 2021 (ARP) contains a provision that is so ambiguous that enforcement will be arbitrary in two briefs filed today in Arizona and Missouri. ARP includes a section that forbids federal funds from being used “to either directly or indirectly offset a reduction in the net tax revenue.” If this provision is violated, the state will be forced to pay a fine “equal to the amount of funds used in violation.”
Joe Bishop-Henchman, NTUF’s Vice President of Tax Policy and Litigation and co-author of the briefs, argues that the language used in ARP is so nebulous that it can be read in a number of different ways as written:
The provision is capable of multiple meanings, such that an honest person (or state government) attempting to abide by its terms is necessarily guessing at its meaning. The result is paralyzing state legislative action for fear of violating the provision, undermining ARPA’s purpose of action to provide pandemic relief. This chilling effect of the ARPA provision, coupled with the lack of legislative history and the limitations of any future Treasury guidance, means one of two things. Either the provision is so capable of multiple meanings that it is void for vagueness, or is an exercise of such great power by Congress as to deprive states of independent action on their tax policies for five years.
If the language is not changed, states might not be willing to take legislative action on tax policy because it could violate this regulation and possibly force the state to pay a fine simply for trying to control its own tax policy. This would be antithetical to ARP’s purpose of providing relief to American taxpayers.
Joe Bishop-Henchman wrote to the defendant Secretary Janet Yellen about this specific provision. The Treasury Department released a statement on one part of the disputed clause, but it still has not addressed seven others that the letter requested clarification on.
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.