BOISE — U.S. Sens. Mike Crapo and Jim Risch on Monday introduced a bill to eliminate a provision in the American Rescue Plan that prevents states from using relief funds to cut taxes.
The State Fiscal Flexibility Act, sponsored by the two Idaho Republicans as well as seven other GOP senators, would amend the $1.9 trillion American Rescue Plan, signed into law last week by President Joe Biden, which provided $350 billion to state and local governments and tribal governments for pandemic-related costs through 2024.
Congressional Republicans, along with state and local GOP officials, have been critical of the Democrat-supported relief package, particularly a last-minute addition to the bill that forbids states from using their share of the $350 billion for tax cuts, and requires the money be repaid to the federal government if it’s used for tax cuts.
Local officials in conservative-led states across the country joined in opposing the provision, which stipulates states shall not use the funds to “either directly or indirectly offset a reduction in the net tax revenue.”
Crapo and Risch’s bill would eliminate that provision.
“If a state like Idaho wants to provide tax relief in the interest of economic recovery, and to help people return to earning their livelihoods, the American Rescue Plan says it will be financially punished by the federal government,” Crapo said in a statement. “This infringes on states’ authority to design their own fiscal policies, and invites partisan politics into federal and state relations.”
The American Rescue Plan — which Biden called “historic legislation” that’s “about rebuilding the backbone of this country” — provides up to $1,400 in direct payments to individuals, and it extends $300 weekly emergency unemployment benefits. Also included are expanded tax credits for children, child care and family leave as well as funding for renters, feeding programs and residents’ utility bills, the Associated Press reported. Congress passed the bill on a near-party line vote, with Republicans in both the Senate and House opposing it.
Democrats slipped the tax-cut provision into the bill the week before it passed both houses, the New York Times reported. Sen. Ron Wyden, D-Oregon, told the Times the funds were meant “to keep teachers and firefighters on the job and prevent the gutting of state and local services that we saw during the Great Recession.” He added, “It’s important that there are guardrails to prevent these funds from being used to cut taxes for those at the top.”
The provision drew criticism from congressional and local GOP lawmakers, who fear it will hamstring their ability to manage budgets.
Such a provision means “poorly managed states receive a windfall,” Risch said in a statement, “while fiscally responsible states like Idaho are barred from providing tax relief to its citizens.” With the State Financial Flexibility Act, “financial competence will be rightly rewarded — not penalized,” he said.
Idaho Gov. Brad Little joined the Idaho senators in criticizing the relief package, calling it “Democrats’ illogical plan.”
“We achieved our record budget surplus after years of responsible, conservative governing and quick action during the pandemic, and our surplus should be returned to Idahoans as I proposed,” Little said. “Simply put, any federal relief funds directed to states should be allocated fairly. What incentive do states have to do the right thing when they get bailed out for doing the wrong thing?”
To read on the Idaho Press website, click here.