U.S. District Court Agrees with AG Yost that Federal Tax Mandate is Unconstitutional


(COLUMBUS, Ohio) — The U.S. District Court of Southern Ohio has ruled that the federal government cannot tie an unconstitutionally ambiguous condition to Ohio’s COVID-19 stimulus funding, vindicating the claim made by Ohio Attorney General Dave Yost.

Yost sought a preliminary injunction in March to bar enforcement of President Biden’s American Rescue Plan Act’s “Tax Mandate,” which would send Ohio $5.4 billion worth of badly needed federal funds only if the state agreed not to use the money, directly or indirectly, to offset tax cuts or credits.

The court’s ruling, issued today, says the provision is likely unconstitutional and Ohio has been injured by the mandate.

“The trial court here agreed with our core argument: the federal government does not have the right to tell the states what to do with its tax policy,” Yost said. “Imagine if a conservative federal government required states to reduce taxes as a condition for receiving emergency funding.

“We look forward to a final judgment.”

In the ruling, the court determined that Ohio “has a substantial likelihood of establishing that, as written,” the provision is unconstitutionally ambiguous.

“It is not sufficient that the state receive funds merely knowing that some kind of strings are attached… Congress must also tell states what those conditions are,” the court ruled. “The states, as sovereigns, are entitled to clarity.”

The court wrote of the provision: “Where things get hopelessly muddled is with regard to ‘indirectly’ and ‘net tax revenue of such state.’ Start with the latter phrase. Net tax revenue as measured against the previous fiscal year? Or against what would have been collected without the change in taxes? Or what?”

The ruling goes on to say: “That on its own would be bad enough, but the ARPA then lumps ‘indirectly offset’ on top. The court honestly has no idea what an ‘indirect offset’ to net tax revenues may be. It became clear at oral argument that the federal government was largely unwilling to hazard a guess as to what it meant either.”

Ohio is harmed by the provision’s ambiguous language and has standing, the court ruled, because it needs to make decisions about its upcoming biennium budget, a point Yost made that the federal government failed to respond to.

“Ohio could not exercise its sovereign prerogative, as it had no way of knowing whether accepting these funds, in exchange for agreeing to be bound by the inscrutable Tax Mandate, represented a good deal or a bad deal for the citizens of this state — information to which it is entitled under the Constitution.”

The court ruled that “preliminary” relief was not needed, because the Treasury Department is unlikely to recoup funds lawfully before the case comes to final judgment. 

Ohio is requesting expedited final judgment.

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