States that want to use COVID relief funds to lower state taxes may, Federal court says

Kansas

A calculator and tax books (Nexstar, file)

TOPEKA (KSNT) – A federal court agreed with Kansas on Nov. 15 that an attempt by Congress and the Biden administration to keep states that accept federal COVID-19 relief money from reducing state taxes is unconstitutional, Attorney General Derek Schmidt said.

This clears the way for Kansas to reduce the state’s sales tax on groceries. Earlier this month Kansas Gov. Laura Kelly announced plans to eliminate the sales tax on food.

“The federal court’s ruling ensures that tax relief enacted earlier this year by the Kansas Legislature over Governor Kelly’s veto will remain in effect and will not result in the Biden administration demanding that Kansas return some of its federal COVID-19 relief funds,” Schmidt said. “It also clears the way for Kansas to adopt our bipartisan recommendations to eliminate or significantly reduce the state’s sales tax on groceries without fear of federal reprisal. This is welcome news that confirms our view that the Constitution does not permit the federal government to micromanage how Kansas sets its own state-level tax policy.”

In March, President Biden signed into law the American Rescue Plan Act, which contained a provision prohibiting states from using any ARPA funds to “directly or indirectly” pay the cost of reducing state taxes for the next three years.

Kansas joined with 12 other states in filing a lawsuit seeking to invalidate the provision as exceeding the power vested in the federal government by the United States Constitution.

The federal court yesterday agreed and entered a permanent injunction prohibiting the federal government from enforcing the provision.

“[T]he Tax Mandate dictates more than what States do with federal funds; it dictates what States do with State funds as well,” the court wrote. “The Tax Mandate’s restriction on direct or indirect state tax cuts pressures States into adopting a particular — and federally preferred — tax policy. … This is a federal invasion of State sovereignty…”

This lawsuit is one of several Kansas has filed or supported challenging attempts by the Biden administration to illegally extend federal authority over states beyond what the Constitution allows.

A copy of yesterday’s court ruling is available at https://bit.ly/3Hryt4E.

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December 31 2021 11:59 pm