Appeals court revives Arizona lawsuit on virus cash tax cut ban

May 20, 2022, 7:27 AM
(KTAR News Photo/Torrence Dunham)...
(KTAR News Photo/Torrence Dunham)
(KTAR News Photo/Torrence Dunham)

PHOENIX — A federal appeals court on Thursday revived Arizona’s lawsuit challenging the part of President Joe Biden’s massive coronavirus rescue law that bars states from using the federal money to offset tax cuts.

The ruling by a three-judge panel of the 9th U.S. Circuit Court of Appeals overruled a decision by a federal judge in Phoenix who said Arizona did not have the right to sue over the provision.

The panel did not rule on the merits of the case, instead sending it back to the same judge for her to weigh the state’s allegation that Congress overstepped its authority when it tied acceptance of American Rescue Plan Act money to state certification that it would not be used to offset tax cuts.

Attorneys general in 22 Republican-led states had urged the appeals court to either revive the case or find the provision unconstitutional.

“The federal government does not get to tell states how to set their tax rates,” Arizona Attorney General Mark Brnovich said in a statement. “Yet, the Biden administration is attempting to intimidate and punish states with the loss of COVID-19 relief funding if they don’t submit to these unconstitutional demands.”

Lawyers for Arizona argued that the provision was ambiguous and illegally infringed on state sovereignty by blocking the state from making its own tax policy decisions.

“This case involves potentially one of the most aggressive encroachments upon state sovereignty ever enacted by Congress in the history of the Republic,” Arizona’s lawyers wrote of the law signed by Biden in March 2021. The $1.9 trillion law gave nearly $200 billion to states to help weather the coronavirus pandemic.

But attorneys for the U.S. Treasury Department argued that Arizona was blowing the impact of the provisions way out of proportion. The law and the Treasury Department’s published rules do not contain a blanket ban on tax cuts, they argued. Rather, “the provision restricts only the use of Fiscal Recovery Funds to offset the revenue effects of tax cuts.”

They also noted that Arizona’s Legislature enacted a $1.9 billion income tax cut last year, something the state would not have done if lawmakers were truly worried about the provision.

The provision was included in Biden’s rescue plan at the insistence of West Virginia Democratic Sen. Joe Manchin. His state’s Republican governor was moving to eliminate income taxes.

Besides Arizona’s challenge, other states have argued the tax cut ban is unconstitutional. A federal judge in November sided with West Virginia and 12 other states that challenged the provision. He agreed with arguments that were similar to what Arizona raised.

The Treasury Department has appealed that ruling.

Lifetime Windows & Doors

We want to hear from you.

Have a story idea or tip? Pass it along to the KTAR News team here.

Arizona News

(KTAR News Photo/Torrence Dunham)...

4 booked for disorderly conduct following Saturday’s Roe v. Wade protest at Arizona Capitol

Four people were booked on charges including trespassing after crowds dispersed following Saturday's protest at the Arizona State Capitol.
1 day ago
(Twitter Photo/@TaylorKinnerup)...

Weekend wrap-up: Here are the biggest Arizona stories from June 24-26

Here are some of the biggest stories that headlined the Arizona news cycle over the weekend.
1 day ago
(Twitter Photo/@ArizonaDOT)...

Flash flood warning issued in Maricopa County amid monsoon storms

A flash flood warning was issued for Maricopa County on Sunday until 8:29 p.m. due to expected rain and wind in the area.
1 day ago
(Facebook photo/Phoenix is Home...
Tom Kuebel

Developer chosen for P83 project near Peoria Sports Complex

The city of Peoria announced a partnership with Common Bond Development Group to redevelop an area near the Peoria Sports Complex.
1 day ago
(Arizona Game and Fish Department photo)...
Tom Kuebel

AZGFD helps release 3 black bears after rehab with Southwest Wildlife

The Arizona Game and Fish Department helped release three black bears into the wild after rehab at the Southwest Wildlife Conservation Center.
1 day ago
Phoenix police are investigating the scene that left one officer hospitalized and another injured e...

Phoenix police investigating stabbing that leaves 2 injured at apartment complex

Police are investigating a stabbing that left two injured after a confrontation with their neighbor Saturday morning, authorities said.
1 day ago

Sponsored Articles


Most plumbing problems can be fixed with regular maintenance

Instead of waiting for a problem to happen, experts suggest getting a head start on your plumbing maintenance.

Best retirement savings rates hit 4.30%

Maximize your retirement savings with guaranteed fixed rates up to 4.30%. Did you know there is a financial product that can give you great interest rates as you build your retirement savings and provide you with a paycheck for life once you retire? It might sound too good to be true but it is not; this product is called an annuity.
Christina O’Haver

BE FAST to spot a stroke

Every 40 seconds—that’s how often someone has a stroke in the United States. It’s the fifth leading cause of death among Americans, with someone dying of a stroke every 3.5 minutes.
Appeals court revives Arizona lawsuit on virus cash tax cut ban