West Virginia Attorney General Patrick Morrisey, one of the leaders in a lawsuit to stop a provision in the recently passed $1.9 coronavirus stimulus bill that bans states that accept money from cutting taxes, said Friday the provision is unconstitutional.
"The bottom line on this case is that you cannot coerce a state to drop one of its core constitutional functions in exchange for a large pot of money from the federal government," Morrisey, a Republican, said on Fox News' "Fox and Friends." "It is not permitted under the case law and the Constitution."
One of the provisions of the American Rescue Plan says that a state or territory shall not use the funds provided either directly or indirectly to offset a reduction in net tax revenue of in states or territories.
State and local governments are to get $350 billion from the measure, but the prohibition against dropping taxes while accepting the money is "truly one of the most amazing provisions you are going to see ever come out of Congress," Morrisey said.
"They are saying that to the extent that your state revenue is lowered or that there is an indirect effect, that you could be subject to a clawback from the federal government," he continued. "When you are talking about a state like West Virginia that has about $1.25 billion at stake, that has a very significant chilling effect."
It is also "clearly a violation" of the 10th Amendment, which concerns the rights that are reserved as those of the states only and not the federal government, said Morrisey.
"This is so critical for us to win because it's the first issue where the Biden administration is trying to run roughshod over the states," he said. "There will be many more, I think the precedent we establish here is going to be revealing for the next four years."
The rule also has different effects from state to state, said Morrisey, because states that manage their budgets are being "penalized."
"Imagine that you wanted to make a small little tweak in your tax code," he said. "Maybe you want to expand the opportunity for people to do charitable deductions or you want to drop the sales tax down, maybe compete with one of your neighbor states. There is a reading of this new law that you are not going to be able to do it.
Treasury Secretary Janet Yellen has said that the government won't be forcing the issue, but "the language is so vague and so open-ended that states are deeply concerned," said Morrisey.
He added that in his state of West Virginia, leaders are working on a "major tax change right now to lure more citizens," and under the new law, it will pay a huge price.
"I'm not going to let that happen," he said. "I represent the people of our state. We are going to stand up and fight."
Morrisey and Alabama Attorney General Steve Marshall are the co-leaders in the legal fight and are being joined by attorneys general from Alaska, Florida, Iowa, Kansas, Montana, New Hampshire, Oklahoma, South Carolina, South Dakota, and Utah.