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Kentucky and Tennessee GAs pursue stimulus tax proceedings

FRANKFORT, Ky. (AP) – Republican attorneys general in Kentucky and Tennessee have joined their voices with several other states opposing a provision of the $ 1.9 trillion pandemic assistance plan that prevents states from using relief funds to offset tax cuts.

Kentucky Attorney General Daniel Cameron and Tennessee Attorney General Herbert H. Slatery III filed a lawsuit Tuesday in Bluegrass State Federal District Court, accusing the federal government of a “takeover. unprecedented power ”.

They sought an injunction to block the application of the tax provision and demanded that the restriction ultimately be lifted.

The lawsuit echoes a similar action filed last week in Alabama federal court by 13 state attorneys general that targeted the provision prohibiting states from using $ 195 billion in federal aid “to directly compensate or indirectly a reduction ”in net tax revenues.

The Cameron and Slatery lawsuit claims the provision unconstitutionally wrests the sovereign power of each state’s legislature to determine tax policies.

Their action called it a case of federal overrun, saying states were being told “they cannot reduce the tax burden on their citizens without incurring a penalty.”

“The fiscal mandate is an unprecedented takeover by the federal government,” says the lawsuit. “At a time when states strive to help their constituents overcome the devastating effects of the pandemic, Congress has chosen to use the pandemic to expand its control over state sovereignty in an unprecedented way.

Defendants in the Kentucky-Tennessee joint trial include the US Treasury Department, which did not immediately return an email asking for comment on Tuesday.

Last month, a larger group of 21 Republican attorneys general wrote a letter asking Treasury Secretary Janet Yellen for clarification on the provision. The ministry said at the time that the provision was not intended to be a blanket ban on cutting taxes. States can still offset tax cuts in other ways.

“Nothing in the law prevents states from enacting a wide range of tax cuts,” Yellen wrote in a response. “It simply provides that funds received under the law cannot be used to offset a reduction in net tax revenue resulting from certain changes in state law.”

The massive aid plan was backed by Congressional Democrats in close party line votes and signed off by President Joe Biden. Kentucky’s share of state aid is expected to be around $ 2.4 billion. Tennessee’s allocation is expected to be around $ 3.7 billion.

Cameron said in a press release that relief funds are “essential” to help Kentucky recover from the economic damage inflicted by the COVID-19 pandemic. This contrasted with the remarks of his fellow Republican and mentor, GOP Senate Leader Mitch McConnell, who said Monday he did not think the new relief money sent to the Kentucky state government was necessary.

Cameron said it was unconstitutional for the Biden administration to “hold the funds hostage if we do not accept Washington’s preferred tax policies.”

Slatery said states have “the constitutional right to implement their own tax policy.”

Before ending this year’s session, the Republican-led Kentucky legislature allocated more than $ 1 billion from the new federal infusion for several big-ticket items. These items included building schools, water and sewer projects, expanding broadband, and paying off a federal loan that kept the state’s unemployment insurance program afloat.

These spending decisions reflected several priorities shared between lawmakers and Democratic Governor Andy Beshear. The governor called it a good start to creating thousands of jobs and better positioning Kentucky for the post-pandemic economy.

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