A decade ago, then-Vice President Biden was caught on a live microphone describing the Affordable Care Act’s passage as “a big f**king deal.” The same could be said about an 11th-hour addition to the American Rescue Plan Act (ARPA), which arguably imposes a ceasefire in the interstate corporate welfare war.
The clause in question, added by Senator Joe Manchin (D-W.Va), prohibits states from using the $220 billion they’ll receive in ARPA relief to cut taxes. The restriction is rigorous: Until 2025, no state may “directly or indirectly” use federal relief funds to offset reductions in net tax revenues through “a reduction in a [tax] rate, a rebate, a deduction, a credit, or otherwise” or by delaying the imposition of any tax or tax increase.
The legislation is broad. States that accept federal relief funds might be legally challenged if they reduce any instance of taxation relative to the current paradigm. This is an unfortunate attack on federalism, but there is a silver lining: It clearly should prohibit any new targeted tax reductions granted by state governments to privileged corporations to counter the negative economic impacts of COVID-19.
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