Florida has joined with 12 other states in a lawsuit challenging a provision of the Biden administration’s American Rescue Plan that seems to bar states from lowering taxes as a condition for receiving the coronavirus aid money.
“The federal government is trying to tell Florida we cannot lower your taxes,” Florida Attorney General Ashley Moody said in a prepared statement. “This is simply outrageous and a gross power grab by our federal government.”
The lawsuit, which was filed March 31 in the U.S. District Court for the Northern District of Alabama, alleges that a provision in Section 602 of the federal coronavirus aid plan is unconstitutional because it encroaches on states’ taxing authority. In turn, the complaint seeks a court order banning the enforcement of the tax provision.
Florida TaxWatch is also pressing for clarification of the tax provision in the law so that it can take an informed position and advocate for the best interests of the state’s taxpayers, according to the organization.
“As the trusted eyes and ears of Florida taxpayers, we have some concern and several questions about the impact of this restriction,” the TaxWatch president and CEO, Dominic M. Calabro, said in an email to the Florida Record.
Florida is making progress in reopening its economy after the downturn caused by the coronavirus pandemic, according to Calabro. But clarity is needed on the interpretation of the federal COVID-19 relief effort, he said.
“Policymakers need to understand how the American Rescue Plan Act of 2021 – and particularly Section 602(c)(2)(A) – will be interpreted by the United States Treasury in order to keep the financial wellbeing of their hard-working constituents top of mind throughout critical decision-making processes,” Calabro said.
The federal lawsuit argues federal Treasury officials cannot mandate that states hand over their taxing authority in return for economic aid they need to get through the pandemic. This creates an untenable choice for the plaintiffs, the complaint says.
“They must either relinquish control over a core function of their inherent sovereign powers, or else, in the midst of a deadly and destructive pandemic, forfeit massive and much needed aid that represents approximately 25 percent of plaintiff states’ respective annual general budgets,” the lawsuit states.
The American Rescue Plan aims to prevent states from lowering taxes for three years, even though it places no restrictions on states that want to increase taxes on citizens, according to the complaint.