The Fifth Circuit Court of Appeals has affirmed apermanent injunction and sided with Attorney General Lynn Fitch agreeingthat the Tax Mandate in the American Rescue Plan Act (ARPA) “unlawfullyforc[es] the States to adopt certain tax policies” and noting that it exceeds.
Congress’ Spending Clause authority and violates the anti-commandeering doctrine.
General Fitch filed this suit alongside the Attorneys General of Texasand Louisiana.“It is the responsibility of our elected legislators to decide how and when to cuttaxes, as well as how to best stimulate economic growth post-COVID-19,” saidAttorney General Lynn Fitch.“This thoughtful opinion ensures thatdecisions with substantial fiscal and economic implications for our State aremade by Mississippi legislators with the needs of the Mississippi citizens theyrepresent in mind. I am proud to stand with both Texas and Louisiana toprotect our right to give money back to the people without federal interferenceor overreach.”The Tax Mandate is a provision of the American Rescue Plan Act (ARPA),signed into law on March 11, 2021, that bars states from “directly or indirectly”using federal aid granted to states in ARPA for tax cuts. Under the taxmandate, the U.S. Treasury may claw back funds it believes have been misusedto provide tax relief.
Attorney General Lynn Fitch, along with the Attorneys General for Louisianaand Texas, filed suit on May 3, 2021, arguing that the Tax Mandate violates theSpending Clause of the U.S. Constitution, commandeers the States’ sovereignauthority over their tax policies in violation of the Constitution’s TenthAmendment, and is ambiguous and not reasonably related to encouragingpost-pandemic economic recovery.“In exercising its power under the Spending Clause, Congress has a constitutional obligation to cut a clear deal with the states when they acceptfederal funding. Because the challenged provision is not clear about what itrequires of the states, it falls short of that obligation and is impermissiblyambiguous,” the opinion explains.Under ARPA, Mississippi received nearly $2 billion in COVID-19 relief funds,which is roughly equivalent to 31% of Mississippi’s 2021 budget.
GovernorReeves signed the Mississippi Tax Freedom Act into law on April 5, 2022. Thislaw provides more than $500 million in tax relief, eliminating the 4% taxbracket and gradually scaling back the 5% top bracket to 4% over 4 years.“ARPA coerces [the States] into making a choice between losing potentiallybillions of dollars or surrendering their ability to set state tax policy,” the three-judge panel continued.The complaint was filed in the U.S. District Court for the Northern District of Texas.
Original source can be found here.