Tennessee, Kentucky AGs win suit over stimulus tax rule

NASHVILLE, Tenn. — A U.S. district court has ruled in favor of two attorneys general regarding a tax rule in the American Rescue Plan.

The lawsuit filed by Tennessee Attorney General Herbert H. Slatery III and Kentucky Attorney General Daniel Cameron claimed a “tax mandate” within the American Rescue Plan Act was unconstitutional.

The plan, which was signed into law of March of 2021, provided nearly $200 billion to states for COVID-19 relief, but required states to “comply with a tax mandate that prevents it from lowering taxes for its citizens for four years,” a news release from the attorney general said.

The suit claimed the mandate took away state’s ability to make taxing decisions.

The court sided with the two attorneys general, writing in the opinion:

“Here, the federal government wants to give Kentucky and Tennessee a lot of money. These funds are desperately needed in the midst of a pandemic. But, they come
with a price—states must forego the exercise of important flexibility and power when it comes to making their own taxing decisions.”

“We are very pleased with the court’s decision,” Slatery said. “Tennessee should not have to hand over its constitutional right to establish state tax policy in exchange for federal relief from this pandemic.”

You can read the ruling here. You can also find the full news release here.

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