— Washington Tuesday, the Supreme Court rejected a legal challenge brought by the state of Missouri against a provision in the $1.9 trillion COVID-19 aid package that forbade states from using economic relief funds to offset tax cuts.
The court case targeted the so-called “tax mandate,” which prohibits states from using their share of almost $200 billion in federal subsidies from the American Recovery and Reinvestment Act to “either directly or indirectly offset a reduction” in their net tax collections. The aid agreement, which was signed into law by President Biden in March 2021, prohibits states from utilizing their portion of the cash intended to offset the economic effects of the pandemic for pension funds.
If a state fails to employ fiscal recovery funds in accordance with the law, the Treasury Department has the authority to collect the monies.
In federal courts around the country, Missouri Attorney General Eric Schmitt and officials from 20 other states contested the clause. In the Missouri case, which was filed shortly after the pandemic relief plan was passed, state officials argued that the law prohibits only the “deliberate use” of American Rescue Plan funds to pay for a tax cut, and that the Treasury Department’s expansive interpretation of the tax mandate exceeded Congress’s authority and was unconstitutional under the 10th Amendment.
Missouri will receive a total of $2.7 billion in pandemic aid, which is typically distributed in two installments.
A federal district court dismissed Missouri’s petition, concluding that the state lacked legal standing to contest the tax demand and that its suit was premature. The 8th Circuit Court of Appeals affirmed, and Missouri appealed to the Supreme Court.
The 8th Circuit’s decision remains in effect as a result of the Supreme Court’s decision not to hear the case.
Schmitt noted in his petition asking the high court to consider the dispute that Missouri’s share of American Rescue Plan funds accounts for 13 to 14 percent of its general fund expenditures in the two years prior to the law’s passage, and that the state’s receipt of these funds is contingent on its compliance with the tax mandate.
“Thus, what the tax mandate means, and whether it is constitutional, matters a great deal — as does the antecedent question of what a state must do to challenge the law or how Treasury implements it,” he wrote.
Schmitt stated, “is simple: The tax mandate prohibits only the deliberate use of ARPA funds to pay for a tax cut; if it sweeps more broadly, the law is unconstitutional.”
The Biden administration asked the Supreme Court not to accept the case, claiming, among other things, that Missouri’s appeal is a “especially undesirable candidate for resolving any constitutional issues,” and that evaluating the merits would be “premature.”
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