Supreme Court Turns Away Appeal About States Using COVID-19 Relief Funds for Tax Cuts

Matthew Vadum
By Matthew Vadum
January 17, 2023Supreme Courtshare
Supreme Court Turns Away Appeal About States Using COVID-19 Relief Funds for Tax Cuts
The U.S. Supreme Court building stands in Washington on Oct. 3, 2022. (Stefani Reynolds/AFP via Getty Images)

The Supreme Court refused on Jan. 17 to take up an appeal by Missouri challenging a ban on states using federal pandemic-relief funds to offset state revenue reductions, such as those attributed to tax cuts or other policy changes.

The decision is a victory for the Biden administration, which had urged the court to deny the petition.

The $1.7-trillion American Rescue Plan Act (ARPA), signed by President Joe Biden on March 11, 2021, was a response to the economic downturn associated with the COVID-19 pandemic. ARPA provided $195 billion in aid to state governments, along with $130 billion in aid to local governments.

The Supreme Court ruling leaves undisturbed a decision by the U.S. Court of Appeals for the 8th Circuit that held that Missouri lacked legal standing to pursue a lawsuit challenging federal conditions imposed on ARPA funding.

Missouri said in its petition that it “interprets the law as prohibiting only the deliberate use of ARPA funds to pay for a tax cut,” and argued the federal government’s policy on how the money was to be spent was unconstitutional.

The state said the federal government’s interpretation of the law would preclude any new state tax policy that leads to revenue reduction without providing offsets.

But Missouri failed to identify a specific state policy that could conflict with the funding conditions, the 8th Circuit found. The state was pursuing “a quintessentially advisory opinion,” which federal courts do not issue, that court stated.

The denial of the petition in Missouri v. Yellen (court file 22-352), came in an unsigned order. The justices did not explain their decision. Janet Yellen is the secretary of the U.S. Department of the Treasury.

The statute provided Missouri with about $2.7 billion with strings attached. A state is not allowed to use the ARPA funding it receives “to either directly or indirectly offset a reduction in the net tax revenue of … [a] state or territory resulting from a change in law, regulation, or administrative interpretation,” Missouri stated in its petition.

The Epoch Times reached out for comment to the Missouri Attorney General’s office and the U.S. Department of Justice but did not receive an immediate reply from either.

Attorney Joseph Bishop-Henchman of the National Taxpayers Union, which filed a friend-of-the-court brief in support of Missouri, took the denial of the petition in stride.

Asked if he was disappointed, the lawyer said, “not at all.”

“This issue will reach the court eventually, [it is] just a question of whether it’s sooner or later. The idea that a state cannot challenge a federal funding condition placed on it is nuts,” he said by email.

Missouri v. Yellen “is the first of the six current ARPA cases to be appealed to the Supreme Court,” Bishop-Henchman said.

“In most of them, the feds have lost and Treasury has been enjoined from enforcing the provision. The Missouri case got stuck on a procedural question, whether Missouri had suffered sufficient harm to have standing to bring the case at all. That’s what was appealed and what the court today declined to review,” he said.

There is a good chance the Supreme Court will take up the issue of funding conditions in the future, the attorney said.

“We had written a brief asking the court to take the case, but I’m not surprised they didn’t. They probably want to wait until several of these cases going different ways are in front of them, not just this first one that didn’t reach the merits.”

From The Epoch Times

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