A coalition of groups from around the nation, that include the Mississippi Center for Public Policy, have joined together in common cause against new overreach by DC politicians. The group is signaling their opposition to new policy that could limit states’ ability to cut taxes.

The recent “American Rescue Plan Act” serves more as a slush fund for fiscally mismanaged states and localities than as a serious attempt to help those struggling with recovering from the economic consequences of COVID-19 and government-imposed shutdowns.

The Act includes $350 billion in State and Local Fiscal Recovery Funds. These funds come in addition to the hundreds of billions in federal assistance to state and local units of government through the CARES Act and other legislative actions taken by Congress in 2020.

Furthermore, Congress has decided to spend this massive amount of money although total state and local revenues actually increased in 2020, and many states have even seen their surpluses expand.

However, the Act goes a step further than just recklessly spending taxpayer dollars. The editorial board of the Wall Street Journal noted that the new law bars states from using the influx of new funding to reduce state taxes directly or indirectly through 2024. This language is vague and no clarifications about it have emerged from the Department of Treasury so far.

The ambiguous language has many rightly concerned that any efforts at the state level to reduce the tax burden of its citizens could be stymied by the federal government.

Recognizing this vast federal overreach, a coalition of concerned leaders has signed onto a new letter to signal their opposition to the unprecedented move. The campaign was organized by the American Legislative Exchange Council (ALEC).

The letter notes, in part:

“Using federal coercion to artificially elevate state tax burdens at a time when small businesses and hardworking American taxpayers need real tax relief is nonsensical. Our groups have spent decades working with state policymakers and watching them achieve more economically competitive business climates through pro-growth tax and economic reforms. Having the federal government use “the power of the purse” in an attempt to curtail the use of competitive federalism is incredibly damaging to our American system of government.”

It continues, “[w]e will work to protect the fundamental principle of federalism and allow states to continue their progress in pursuing economic gains as the ‘laboratories of democracy.’ Restricting states from providing pro-growth net tax relief tips the scales of federalism inexorably toward central planning and micromanagement by the federal government.”

You can read the letter in its entirety here. It was signed by MCPP President Douglas Carswell.

This entirely new level of dramatic fiscal recklessness and federal overreach demands opposition. The Mississippi Center for Public Policy is standing for federalism and the ability of states to conduct and control their own tax policy without new limitations.