A U.S. District Court judge today struck down as unconstitutional part of a federal law that imposes burdensome restrictions on how states spend COVID-19 relief funds.
Alaska was among a coalition of 13 states to challenge a Biden administration edict contained in the American Rescue Plan Act of 2021. The law specifies that funding received by states under the act may not be used either directly or indirectly for tax relief. Alaska and other states argued – and a judge in the Western District of Alabama agreed – that the law illegally wrested away state taxing authority under the 10th amendment.
“This is a huge win for the states in preserving the Tenth Amendment,” said Alaska Governor Mike Dunleavy. “Lately, we have been witnessing the Biden Administration’s tireless attempts to seize power from states. Now, we have proven that the White House cannot continue to overreach and threaten individual liberties with unconstitutional mandates.”
Currently, there are no pending proposals in Alaska to decrease taxes so the law would not have had an immediate, direct impact on the state. However, the mandate is one of a growing number of examples of federal overreach into matters that should be left to the states.
“The federal government promised states money to recover from the pandemic, but its conditions on taking the money ran afoul of the Constitution and state sovereignty,” said Attorney General Treg Taylor. “This so-called ‘Tax Mandate’ is an illegal intrusion into budgeting decisions that should rightfully remain with the states.”
Congress passed ARPA, a $1.9 trillion stimulus bill, in mid-March. States received about $195.3 billion, but with certain conditions including the “Tax Mandate.” States were not allowed to use the stimulus money to “directly or indirectly offset a reduction in the net tax revenue.” Thus, the law forbids state Legislatures from using the money to offset any sort of tax relief, even indirectly.
Alaska and other states said it was uncertain whether legislatures could enact any tax cuts at all without being required to pay the money back to the federal government. They called the Tax Mandate “coercive, ambiguous and unrelated to the ARPA’s purpose” in their lawsuit.
Today’s ruling prohibits the federal government from enforcing the Tax Mandate.