Louisiana Attorney General Jeff Landry joined a challenge to the Biden Administration’s recently passed $1.9 trillion COVID-19 relief package, saying the wording in the provisions for helping state and local governments could effectively forbid state legislators from being able to pass tax cuts.
Louisiana legislators are working on revamping the state’s tax system with an eye towards lowering the overall tax burden by removing exemptions and expanding who has to pay. The Legislature convenes on April 12.
Landry and 20 other Republican attorneys general wrote the wording in the 800-plus page bill that said the funds can’t be used “to either directly or indirectly offset a reduction in the net tax revenue” and if that happens, the states will have to repay the federal government. At least that’s the way the provision’s wording seems to say.
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“The import of the Act’s prohibition against ‘offsetting’ reductions in state tax revenue is unclear, but potentially breathtaking,” the attorneys general wrote U.S. Department of the Treasury Secretary Janet L. Yellen in a seven-page letter. “Such federal usurpation of state tax policy would represent the greatest attempted invasion of state sovereignty by Congress in the history of our Republic.”
Landry warned that a single governor could accept stimulus funds and thereby bind both his state legislature and his successor from cutting any tax or tax assessments in the near future.
The attorneys general asked the Treasury Department, which is currently writing the rules for how state and local governments can use the American Rescue, to specifically spell out whether the wording “precludes express use of the relief funds to provide direct tax cuts.”
“We cannot allow the federal government to usurp Louisiana’s constitutional authority to govern itself,” Landry said. “If we do, it will be the end of state sovereignty.”
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Landry’s announcement has the support of Dawn Starns McVea, state director of the National Federation of Independent Business, a trade association representing small business owners.
“We share the attorney general’s concern regarding the provisions of the recently passed American Rescue Plan,” McVea said. “Since last year’s legislative session ended, lawmakers have been working on long-overdue tax reform for the fiscal session that begins in April.”