Hawkeye Reporter

A federal court ruling that overturns a provision of the American Rescue Plan Act prohibiting states from cutting taxes is entirely appropriate, according to an Iowans for Tax Relief official.

U.S. District Judge L. Scott Coogler of the Northern District of Alabama ruled Monday that Congress had overstepped its legal authority by mandating how states could use the federal dollars. It was “a federal invasion of state sovereignty,” Coogler said that was “unconstitutionally ambiguous.”

Iowa was one of 13 states, along with Alabama, Arkansas, Alaska, Florida, Kansas, Montana, New Hampshire, Oklahoma, South Carolina, South Dakota, Utah and West Virginia, to ask for the clause to be set aside.

Iowans for Tax Relief Foundation Policy Director John Hendrickson said this was a proper interpretation of federal and state laws.

“The entire American Rescue Plan Act (ARPA) may not have been necessary. Iowa did not need these funds,” Hendrickson told Hawkeye Reporter. “Nevertheless, ARPA is controversial because of the vague language and provision that prohibits states from using the funds to cut tax rates. The recent court ruling affirms that this is unconstitutional and an overreach by the federal government. President Biden and the architects of ARPA clearly do not understand federalism. This decision may not settle the ARPA and state tax cut question, but it is good news for traditional federalism.”

Coogler rejected a specific section of the package that reads, “A state or territory shall not use the funds provided under this section or transferred pursuant to section 603(c)(4) to either directly or indirectly offset a reduction in the net tax revenue of such state or territory resulting from a change in law, regulation, or administrative interpretation during the covered period that reduces any tax (by providing for a reduction in a rate, a rebate, a deduction, a credit, or otherwise) or delays the imposition of any tax or tax increase.”

Hendrickson said Iowa Gov. Kim Reynolds is making tax reform a priority, which is playing well with Hawkeye State voters. He said the court ruling adds to her authority to move forward.

“Iowa has a $1.24 billion budget surplus, and this will provide a historic opportunity for pro-growth tax reform. This year, Iowa was one of 15 states to enact tax reform,” Hendrickson said. “The reason Iowa was able to do this was the fiscal conservative policies of Gov. Reynolds and the Republican-led Legislature. By keeping spending low, lowering tax rates, and keeping the economy open, Gov. Reynolds was able to guide Iowa's economy through the COVID-19 pandemic and create a quick economic recovery.”

In a press release, Reynolds termed a ruling “a major victory for the state of Iowa and Iowa taxpayers” at a time when she says President Biden was trying to force states to comply with his wishes, no matter their financial status.

"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 said. “With this ruling, Biden’s administration can’t keep us from cutting taxes and I look forward to doing just that.”

Hendrickson said the president’s grasp of economics seems unsteady, which can have major implications, another reason to celebrate this ruling.

“This ruling is an example of the disarray of the Biden administration,” he said. “The massive spending is leading to higher inflation, and we could soon be entering into a period of stagflation with slow growth. This is just another example of progressive policy that disregards the Constitution.”

Iowans for Tax Relief has advocated for lower taxes, less government spending and fewer regulations for four decades.