by J.D. Davidson
Ohio Attorney General Dave Yost says Congress crossed a line and U.S. Treasury Secretary Janet Yellen struggles to explain whether states retain authority to set their own tax codes if they accept money from the recently passed American Rescue Plan.
Yost responded Thursday with a motion in support of his lawsuit for a temporary restraining order to stop the federal government’s tax mandate in the ARP. Yost believes the mandate holds states hostage and takes away Ohio’s control of its tax structure and economic policy.
“Congress crosses the line separating permissible encouragement from impermissible,” Yost’s latest motion reads. “Ohio stands to receive $5.5 billion. In the pandemic-caused economic crisis, Ohio cannot realistically turn that down.”
The U.S. Treasury argued last week that Ohio lacked standing to challenge the law because of a lack of actual harm. It said the state hasn’t enacted any tax cuts it wants to offset with federal money.
The Ohio House, however, passed a 2% across-the-board income tax cut as part of its proposed two-year budget. That plan still must pass the Senate and be signed by Gov. Mike DeWine. Yellen called that a proposed tax cut and not enough to give the state standing to sue.
Treasury also argued states are free to cut taxes, just not use American Rescue Plan funds to plug holes from the loss of revenue.
“If Ohio dislikes the funding condition, or any other provision of the act, it is free to decline the generous federal aid in whole or in part – Ohio voters know where to turn if they like, or dislike a state’s choice,” the Treasury Department said in its motion.
Yost also argued the tax mandate forbids states from reducing taxes but places no limits on giving money to residents.
“So while the mandate would penalize Ohio for giving a $500 tax break to everyone who pays at least $1,000 in taxes, it leaves the state free to give a $500 subsidy to the very same people,” the motion reads. “The only explanation for allowing one but not the other is a desire to commandeer state taxing authority alone.”
Yost filed for a temporary restraining order a day after 21 attorneys general from across the country sent a letter to Yellen threatening to sue if the tax mandate was not narrowed.
Attorneys general from 13 other states filed a lawsuit in late March in U.S. District Court in Alabama seeking the same relief Yost asked for in Ohio.
– – –
An Ohio native, J.D. Davidson is a veteran journalist with more than 30 years of experience in newspapers in Ohio, Georgia, Alabama and Texas. He has served as a reporter, editor, managing editor and publisher. He is regional editor for The Center Square.