Frequently Searched

Should All States Tax and Spend Like California? President Biden’s Stimulus Plan Could Make It So

June 24, 2021

President Biden’s recently enacted American Rescue Plan Act gives states billions for COVID-19 relief, but with strings attached: States that take it are effectively banned from cutting taxes through 2024. The policy not only has extraordinary repercussions for the nature of states’ power — it would also slow states’ recovery.

The Act says states can’t use their federal funds to “directly or indirectly offset” revenue loss from a tax cut. If they do, the Treasury secretary can take their grant money back. Defenders of this “tax mandate” say it ensures states use their federal grants for COVID relief, not to “pay for” tax cuts. But that makes no sense, given that the Act otherwise gives states broad leeway. The mandate’s true purpose is obvious: to push all states to adopt policies favored by the high-tax states that are losing residents to lower-tax states.

The tax mandate isn’t necessary to make sure states use their grant money for COVID relief. The Act elsewhere requires states to tell the Treasury Department what they used their relief money for. If a state receives, say, $5 billion, it has to show that it actually spent $5 billion for purposes the Act allows. A state has to pay back any portion of the money that it spends on anything else. That rule ensures states use their federal grants for COVID relief. The tax mandate does not: A state could run afoul of it even if it spends the full amount of its grant on federally approved purposes.

Read the rest of this op-ed at the National Review.

Jacob Huebert is a Senior Attorney at the Goldwater Institute.



More on this issue

Donate Now

Help all Americans live freer, happier lives. Join the Goldwater Institute as we defend and strengthen freedom in all 50 states.

Donate Now

Since 1988, the Goldwater Institute has been in the liberty business — defending and promoting freedom, and achieving more than 400 victories in all 50 states. Donate today to help support our mission.

We Protect Your Rights

Our attorneys defend individual rights and protect those who cannot protect themselves.

Need Help? Submit a case.

Get Connected to Goldwater

Sign up for the latest news, event updates, and more.