Thirteen states have banned together to sue the Treasury Department, according to The Washington Examiner.
The suit outlines “one of the most egregious power grabs by the federal government” in U.S. history.
The lawsuit alleges that Joe Biden’s $1.9 trillion relief package is unconstitutional.
The lawsuit claims that the relief bill limits the ability of states to provide tax cuts.
The suit argues that the legislation dictates that to receive some $350 billion in funding designated for state and local governments, states must abstain from any form of tax cuts.
West Virginia Attorney General Patrick Morrisey, Alabama Attorney General Steve Marshall, and Arkansas Attorney General Leslie Rutledge are leading the litigation with the support of 10 other states.
The lawsuit was filed in the U.S. District Court for the Northern District of Alabama.
The Republican attorney’s general claims that funding cannot be used to offset tax cuts or credits “directly or indirectly.”
It is argued that the funding for offsetting tax cuts is not available due to the fungibility of money.
“Never before has the federal government attempted such a complete takeover of state finances,” said Morrisey in a statement.
“We cannot stand for such overreach. The Constitution envisions co-sovereign states, not a federal government that forces state legislatures to forfeit one of their core constitutional functions in exchange for a large check equal to approximately 25 percent of their annual respective general budgets.”
States that have signed into the lawsuit are Alaska, Florida, Iowa, Kansas, Montana, New Hampshire, Oklahoma, South Carolina, South Dakota, and Utah.
Many AG’s from these states signed an open letter to Treasury Secretary Janet Yellen.
In the letter that they signed they call for clarification regarding the provision.
Yellen addressed the brewing tax war in her hearing with Federal Reserve Chairman Jerome Powell.
Yellen said that the Treasury Department has 60 days from when the law was enacted to issue guidance regarding the matter and noted a “host of thorny questions” that the department will have to answer.
“We will have to define what it means to use money from this act as an offset for tax cuts, and given the fungibility of money, it’s a hard question to answer,” she said.
“But that’s what we’re required to do, and we will do our best to offer guidance on it.”
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The lawsuit was not entirely unexpected as they had threatened legal action over the matter.
The 13 states join Ohio, Arizona, and Missouri, which have separately filed their own lawsuits over the provision.