Washington — The Supreme Court on Tuesday turned away a legal battle brought by the state of Missouri over a measure in thethat prohibited states from using economic relief money awarded to them to offset tax cuts.
The court fight took aim at the so-called “tax mandate,” which bars a state from using their portion of nearly $200 billion in federal grants from the American Rescue Plan to “either directly or indirectly offset a reduction” in its net tax revenue. The aid package, which President Biden signed into law in March 2021, also bars states from using their share of the money meant to mitigate the economic effects of the pandemic for pension funds.
If a state does not use its fiscal recovery money in compliance with the law, the Treasury Department can recoup the funds.
Missouri Attorney General Eric Schmitt and officials from 20 other statesin federal courts across the country. In the Missouri case, filed just after the pandemic relief plan was enacted, state officials argued the law prohibits only the “deliberate use” of American Rescue Plan funds to pay for a tax cut, and the Treasury Department’s broad interpretation of the tax mandate exceeded Congress’s power and was unconstitutional under the 10th Amendment.
Missouri is set to receive a total of $2.7 billion in pandemic assistance, and for most states, the money is awarded in two tranches.
A federal district court dismissed Missouri’s case, finding the state lacked legal standing to challenge the tax mandate, and its suit was premature. The U.S. Court of Appeals for the 8th Circuit affirmed, and Missouri appealed to the Supreme Court.
The high court’s decision not to hear the case leaves the 8th Circuit ruling in place.
In his petition requesting the high court consider the dispute, Schmitt noted that Missouri’s share of American Rescue Plan funds constitutes 13% to 14% of its general fund expenditures in the two years before the law’s passage, and how much of that money the state receives depends on its compliance with the tax mandate.
“Thus, what the tax mandate means, and whether it is constitutional, matters a great deal — as does the antecedent question of what a state must do to challenge the law or how Treasury implements it,” he wrote.
The state’s position, Schmitt continued, “is simple: The tax mandate prohibits only the deliberate use of ARPA funds to pay for a tax cut; if it sweeps more broadly, the law is unconstitutional.”
The Biden administration urged the Supreme Court not to take the case, arguing in part Missouri’s challenge is an “especially undesirable candidate for resolving any constitutional issues,” and considering the merits would be “premature.”