The Arizona Attorney General’s Office has filed the final brief in Arizona’s lawsuit against the U.S. Department of Treasury and federal officials challenging the Tax Mandate of the American Rescue Plan Act (Act) because it threatens to penalize states by withholding federal COVID-19 relief funding if they lower taxes in any fashion.
Arizona is asking that the Court declare the condition unenforceable and enjoin enforcement of the Tax Mandate. It does not seek to prevent Arizona from receiving the COVID-19 funds.
The Attorney General’s brief argues that the Tax Mandate is unconstitutionally ambiguous in that Congress failed to give Arizona and other states fair notice of the conditions upon which federal funds were being offered. Binding U.S. Supreme Court precedent has held that such ambiguity is fatal. In addition, Arizona’s brief argues that prohibiting any and all tax cuts is not properly related to federal spending.
After hearing oral argument on June 22, U.S. District Judge Diane Humetewa agreed to consolidate trial on the merits and issue a final judgment in this case. She also permitted both sides to file a final brief, which Arizona filed late Wednesday night.
The Court is expected to rule on the case and issue a final judgment in due course.
On Thursday, the Arizona Attorney General’s Office filed a lawsuit against the federal government in an effort to challenge the Tax Mandate portion of the American Rescue Plan Act.
The Act threatens to penalize states by withholding federal COVID-19 relief funding if they lower taxes in any fashion, according to the Attorney General’s Office (AGO).
Thee state argues that the Tax Mandate of the Act is unconstitutional and threatens its sovereignty.
In the lawsuit filed in the U.S. District Court of Arizona, the AGO argues the Tax Mandate is ambiguous and the Treasury has failed to provide Arizona with the proper assurances that states can continue to craft their own tax policies and budgets without fear of federal encroachment, even if those policies are unrelated to relief funds.
Arizona is asking the court to provide both declaratory and injunctive relief.
The Tax Mandate of the Act forbids states from using the relief funds to “directly or indirectly offset a reduction in… net tax revenues.”
The AGO also argues the Tax Mandate represents an “unprecedented intrusion on the separate sovereignty of the States through federal overreach. The Tax Mandate undermines democratic accountability by empowering current governors in ways that violate separation of powers. Because the Act funds are available until 2024, a single governor could bind both the state legislature and a successor governor from providing any tax relief in the future. This would be a clear intrusion by Congress upon the democratic structures of the States.”
