Rescue act

American Rescue Act forces states – Ohio defends itself

President Joe Biden speaks during a “Help is Here” touring event to extol the US $ 1.9 trillion bailout law in Columbus, Ohio on March 23, 2021. (Leah Millis / Reuters)

As Ohio’s Attorney General, I will not let Biden violate the Constitution while forcing our state to bend to his will.

NOTjudge, but don’t push, the Supreme Court tells the federal government about the states. This month’s new Congress kicked in right away, and Ohio pushed back last week with a lawsuit that could set an important precedent for federalism.

Congress passed the American Rescue Plan Act of 2021 with an eleventh-hour Easter egg, drafted by Senate Majority Leader Chuck Schumer (D., NY), which prohibits states from using the money of the law for directly or indirectly reduce a state’s net tax revenue. The federal government is authorized under the Act to recover money from states that violate this provision.

Now Ohio has no legislative tax cuts in the hopper. (Even providers should remember that both ends of the Laffer curve have a value of zero: somewhere along that curve, lower tax rates produce lower tax revenue, and a rate of zero produces zero. ) But Schumer’s Easter Egg is a big one and full of surprises. This would affect not only Ohio tax policy, but also economic development and job creation efforts through tax credits and allowances, decisions of the Ohio Tax Commissioner and may – even be corporate zones.

Ohio’s argument with the federal government is not about tax cuts; the question is whether the federal government can use its disbursements to dictate state policy – on this or any other matter that does not fall under the federal government’s constitutional jurisdiction.

The Supreme Court has ruled that when the federal government wants to put conditions on the money it sends back to the states, a few thin cords are acceptable; coercion is not. So what are some chains?

In the early 1980s, each state set its own age for alcohol consumption, which ranged from 18 to 21. Drunk driving was a leading cause of traffic accidents and fatalities, and young drivers died more frequently than non-drivers. The federal government wanted a national drinking age, but clearly did not have the power to impose it. So, reasoned intelligent Washington lawyers, why not just condition federal highway money on raising the state’s age to 21?

It was controversial at the time. Politicians called it a “small ban” and accused the federal government of exaggerating. President Reagan has expressed reservations.

But over time Reagan – always concerned with practical politics – came along. In 1984, the New York Times noted that by dropping his opposition to the measure, Reagan said he was convinced by the evidence that increasing the age of alcohol consumption could save lives. Additionally, some of Reagan’s re-election strategists made no secret of their hope that the issue would help the president gain a place among voters.

“This is a serious national problem, and it touches all of our lives,” Reagan said as he signed the bill in 1984. “With the problem so clear and the proven solution at hand, we have no doubts on this judicious use of Power. ”

A trial ensued. The Supreme Court, in South Dakota vs. Dole, said the drinking age requirement did not violate the Constitution, including the Tenth Amendment, noting that only 5 percent of road funds would be withheld for non-compliance – mere inducement, not coercion.

During the Obama administration, the federal government abandoned the pretense of tying thin strings and opted for heavy rope. Under the Affordable Care Act, a state that wanted to continue receiving federal funds for the Medicaid program had to dramatically expand Medicaid, which would cost states billions of dollars. The Supreme Court ruled in NFIB v. Sebelius, 7-2, that Obamacare’s mandatory Medicaid expansion was unconstitutionally coercive.

Schumer’s Easter Egg – the federal tax mandate – is the same thing, and that’s why Ohio has gone to court.

Ohio will receive $ 5.5 billion under the American Rescue Plan Act, more than 7% of the state’s total spending last year. Critics say, “If you don’t like it, don’t take the money. But it was the same argument in NFIB – a choice that the Supreme Court compared to a “gun to the head”.

The money to be distributed through the law is not sitting in a coffee canister behind the secretary of the treasury’s desk. It will be borrowed and the people of Ohio will have to repay that money whether they “accept” the money or not. AT not to accept the money is to accept a penalty of $ 5.5 billion, plus interest, against the state.

It is not a simple incentive to a partnership, as described in South Dakota versus Dole. The American Rescue Plan Act’s tax mandate uses the federal spending power to impose state tax policy, effectively enacting a tax stage although 2024.

But state fiscal policy is inherently a state prerogative. And this is one of the clearest examples of the strengths of federalism: some states today have low overall charges and fewer services. Others have higher tax burdens and more services. Some states tax the income; others, consumption. People move from some of these state “democracy labs” to others.

Federalism is a guarantee against a fatal error. When I was a lawyer in private practice, I would advise clients to incorporate different business units as separate entities, so that a mistake in one would not ruin the whole business. Military commanders compartmentalize information on the basis of “need to know” for the same reason.

Federalism limits the harmful effects of ill-advised experiments to the states which carry them out. Positive results can and are being implemented in other jurisdictions.

Federalism protects conservative states from the domination of progressive federal governments; it protects progressive states from the domination of conservative federal governments.

The Ohio trial will mark the limits of federal power and protect the safe space in which states can operate. Attorneys general on both sides should support this effort. We make the argument to protect the red and blue states alike.