SALT LAKE CITY – Utah Attorney General Sean Reyes has joined 12 other state legal officers in a federal lawsuit over provisions in President Joe Biden’s $1.9 trillion COVID-19 stimulus plan that could potentially prohibit states from providing tax cuts for their citizens.
“I don’t even know if it’s constitutional to do that,” said state Rep. Dan Johnson (R-District 4) during a recent virtual town hall. “But I kind of think that (Democrats in Congress) think they can do whatever they want.”
Thirteen state attorneys general agree with Johnson, saying that stipulation in the so-called “American Rescue Plan Act” is an unconstitutional violation of state sovereignty. Their lawsuit, filed in the U.S. District Court in Alabama, seeks to strike down that provision of the Biden plan.
At stake in that legal action is the $100 million tax cut for some Utahns that has already passed the Utah Legislature and been signed into law by Gov. Spencer Cox.
“The Utah Legislature recently passed $100 million in tax relief to families with children, veterans and older residents receiving Social Security,” Reyes said in a statement explaining his decision to join the lawsuit. “But that relief is now at risk because the American Rescue Plan Act potentially denies states the ability to cut taxes.”
Biden signed the budget-busting bailout legislation in mid-March, just days after the Utah Legislature sent its tax cut proposal to Cox for approval.
The state attorneys general, including Reyes, are concerned about a stipulation buried in the fine print of the “American Rescue Plan Act” that prohibits states from “directly or indirectly” using its funds to provide tax relief to their citizens.
The Biden plan also threatens to withdraw its stimulus funds on a dollar-for-dollar basis as a penalty for any current or future tax cuts. Since the law runs through 2024, state officials in Utah worry that ambiguities in the COVID-19 relief plan could result in a price tag of up to $400 million for Utah’s planned tax cut.
The controversial “American Rescue Plan Act” was passed without of single GOP supporter in Congress, because Republicans argue that less than 10 percent of its $1.9 trillion price tag will be allocated to COVID-19 health care expenses and only 1 percent will go to vaccine distribution.
But fiscal analysts from the Kem C. Gardner Institute at the University of Utah estimate that Utah may receive up to $8 billion from the stimulus package. About half of that amount will come in the form of direct payments of $1,400 to individual Utahns that are already being received in more than 80 percent of statewide households.
State officials estimate that Utah will receive about $2.7 billion in additional federal funds, with about $1.5 billion earmarked for the state and about $1.1 billion going to local governments. The remaining $1 billion will fund capital projects.
The states allied with Utah in the lawsuit against the American Rescue Plan Act are Alabama, Alaska, Arkansas, Florida, Iowa, Kansas, Montana, New Hampshire, Oklahoma, South Carolina, South Dakota and West Virginia.