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Republicans Move to Reverse Stimulus Provision Barring Aid-Based State Tax Cuts

Chris Gaetano
Published Date:
Mar 15, 2021

Republicans are working to remove a provision of the newly enacted $1.9 trillion pandemic relief/stimulus bill that specifically bars state governments receiving aid from using the funds to finance tax cuts. They say it represents federal government overreach on how a state can and can't use its money, the New York Times reported

The provision was inserted at the last minute due to concerns of congressional Democrats, including the more-conservative Sen. Joe Manchin (D-W.Va.), that certain governments would not use the aid money as intended. This was especially a concern, given that, despite previous fears, state government revenues have been relatively flat, or down only slightly, compared to other years, according to the Times. 

But Republicans have bristled at the provision, saying that states should be able to decide what to do with their money, no questions asked, even if it's to fund tax cuts rather than services—for example, the salaries of teachers and firefighters. Beyond this, they argue that the provision makes the task of budgeting more complicated for states. Sen. Mike Braun (R-Ind.) has introduced legislation specifically to reverse the language banning such maneuvers. Considering the dominance of Democrats in both the House and Senate, however, and especially considering that Sen. Manchin, seen as the Democrat most amenable to Republican overtures, supports the restrictions, the bill faces an uphill climb. 
Practitioners interested in hearing top experts from Hodgson Russ discuss New York’s response to the Cares Act; the New Form IT-558, New York adjustments due to decoupling from the IRC; pandemic-created teleworking issues; and new legislative proposals for 2021-22 can take, on demand, New York State Tax Implications of the Federal CARES Act.

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