On Monday, a federal district court judge in Alabama ruled in favor of the 13 states suing the Biden Administration over the unclear provisions laid out in the American Rescue Plan Act (ARPA) that attempts to prohibit states from cutting taxes. “The language of the Tax Mandate makes it impossible for States to make an informed choice about the costs of receiving ARPA funds because it is impossible to know how to exercise taxing authority without putting ARPA funds at risk,” the judge wrote in his ruling. “Money is fungible, meaning ‘of such a nature that one part or quantity may be replaced by another equal part or quantity in paying a debt or settling an account’ or ‘capable of mutual substitution: interchangeable.’ Thus, any ARPA funds the Plaintiff States receive could be viewed as indirectly offsetting any reduction in net tax revenue from a change in state law or policy.” Iowa joined the lawsuit in late March and Gov. Reynolds says the finding that Congress exceeded its authority by attaching vague and ambiguous conditions on ARPA funds is a major victory for the state and for Iowa taxpayers. “The Biden Administration was trying to punish fiscally responsible states like Iowa, which has a record budget surplus, and that’s why we took legal action,” she says. “With this ruling, Biden’s Administration can’t keep us from cutting taxes and I look forward to doing just that.” The court permanently enjoined this provision of ARPA against the plaintiff states, meaning the language therein cannot be enforced.
