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Nine states urge Supreme Court to take up ARPA tax cut case

A coalition of nine states and two think-tanks have filed amicus briefs urging the Supreme Court to take up Ohio’s challenge to Janet Yellen and the Treasury Department’s ban on using federal pandemic aid for tax cuts.

The coalition is made up of representatives from Texas, Virginia, Idaho, Mississippi, Montana, Nebraska, New Hampshire, South Dakota, and Utah, in addition to the Buckeye Institute and Goldwater Institute, which are all standing behind Ohio in urging the Supreme Court to “uphold state sovereignty” over what they see as a mandate that’s unconstitutionally ambiguous and coercive.

In their letter, the nine states are leaning on the Constitution’s Spending Clause, arguing that the clause gives Congress the power “to pay the debts and provide for… general welfare of the United States,” but also that the Court has also “recognized limits on Congress’s power under the Spending Clause to secure state compliance with federal objectives.”

Citing previous Supreme Court cases, the letter details that the Court has in the past placed two conditions attached to Spending Clause legislation: that if Congress desires to condition States’ receipt of federal funds, it must do so unambiguously, and secondly, that the offer cannot be coercive.

“The conditions the federal government placed on ARPA funds through the Tax Mandate violate both limits–and in so doing harm the states by circumscribing their ability to set their own taxing policy,” the nine state amicus brief said. “This Court should grant the writ to enforce those limits,” they added. “And if the severe condition placed on funds crucial to States’ recovery from an unprecedented global pandemic was not coercive, it is difficult to imagine what is.”

The Columbus, Ohio-based think-tank Buckeye Institute’s amicus brief rests on similar arguments about the “tax mandate’s” ambiguous nature, and goes further to urge the Court that review of this case is urgently needed to clarify the tax mandate’s impact on states’ exercise of their own taxing powers and that Court review of the mandate is inevitable, given the number of other states still challenging the case at the district court level and that this case provides an ideal and timely vehicle.

“The State of Ohio has consistently challenged the tax mandate’s constitutionality from day one, and its circumstances are identical to those of other states whose exercise of core powers lays beneath a cloud of uncertainty,” Buckeye’s brief said. “Although the Court below held Ohio’s challenge to be moot, that determination was intertwined with its view of the merits, in particular its acceptance of the view that Treasury’s rulemaking could cure or at least obviate the injury inflicted by the statutory Tax Mandate,” they added. “If the Court does grant review on the mootness question, which it should do, it should also grant review on the tax mandate’s constitutionality so as to provide the States the certainty of law that they desperately need.”

Phoenix-based Goldwater Institute argues that the Court should grant Ohio’s petition because “‘Our Federalism’ contemplates states, not federal agencies, being in the driver’s seat,” the letter said. 

Goldwater cites South Dakota v. Dole, in 1987, when the Court found that Congress did not exceed its spending powers or violate the Twenty-First Amendment by passing legislation conditioning the award of federal highway funds on the states’ adoption of a uniform minimum drinking age, as the last time federal spending powers were tested.

“More than 35 years after South Dakota v. Dole, state and federal officials–and, of course, lower courts–remain unable to discern when the federal government has gone too far under the Spending Clause. That is due to this Court’s failure to explain the limits, and the Court should take this case in order to provide the guidance lower courts need,” Goldwater’s amicus brief said.

But Goldwater also argues that Dole‘s presumption that states can say no is unrealistic in many cases and further cites the 2012 case NFIB v. Sebelius, that recognized when the amount in question is so large that a state has no realistic option of saying no, Congress is in the position of making a “your money or your life” type of demand on the states.

“The fact that even a state that says no is still forced to subsidize those that say yes not only makes the simplistic ‘choose it or refuse it’ theory behind Dole untenable, but also suggests the need for a broader conception of standing in cases involving spending conditions,” the Goldwater brief said.

The decision for the Supreme Court to take on the case could affect challenges in other states, including Kentucky, Tennessee, Arizona, Missouri, West Virginia and Texas.

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