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Iowa joined 12 other states Wednesday in suing President Joe Biden's administration over a rule in the federal stimulus act that bars states from using relief money to offset tax cuts.
The filing in U.S. District Court in Alabama asks judges to strike down a provision in the wide-ranging relief act signed by Biden that prohibits states from using $195 billion of federal aid 'to either directly or indirectly offset a reduction” in net tax revenue. The restriction could apply through 2024.
'I want to keep reducing taxes on Iowans,” Republican Iowa Gov. Kim Reynolds said Wednesday on 'The Simon Conway” show on WMT-AM radio. 'We are in a position to continue to cut taxes on hardworking Iowans next year. We're not going to stop. We can't have the federal government telling us no.”
She said her administration asked the federal government for an explanation and got only vague responses.
'We don't believe it's constitutional,” she said.
Iowa is the only state among the 13 suing Biden that is represented by a Democratic attorney general - Tom Miller.
But his name does not appear on the lawsuit, although the names of each of the other state attorneys general do. Nor did Miller announce the suit on his website as he has with others his office has joined in the past.
Reynolds said she directed him to be part of the otherwise Republican coalition.
'The code stipulates that if I request the attorney general to file on our behalf that they shall,” she told the WMT-AM radio audience. 'And we did and they did, and I'm proud and happy to be part of this coalition that is pushing back on what we believe the treasury and Biden administration is trying to do.”
A bigger group of 21 Republican attorneys general earlier this month wrote a letter seeking clarification from Treasury Secretary Janet Yellen, who is named in the new lawsuit. The department at the time said the provision isn't meant as a blanket prohibition on tax cuts. States can still offset tax reductions through other means.
'Nothing in the Act prevents States from enacting a broad variety of tax cuts,” she responded. 'It simply provides that funding received under the Act may not be used to offset a reduction in net tax revenue resulting from certain changes in state law.”
West Virginia Attorney General Patrick Morrisey, who coled the new lawsuit, argued the interpretation of the word 'indirectly” could come back to haunt states that cut taxes.
'This ensures our citizens aren't stuck with an unforeseen bill from the feds years from now,” he said in a statement.
Besides Iowa, the states filing the suit were Alaska, Florida, Kansas, Montana, New Hampshire, Oklahoma, South Carolina, South Dakota and Utah. Ohio Attorney General Dave Yost, a Republican, earlier this month separately asked a federal judge to block the tax-cut provision.
Several state legislatures including Iowa's are weighing tax reform this year, which is partly driving the lawsuit.
Yellen, whose department declined new comment, said in her letter that 'it is well established that Congress may place such reasonable conditions on how States may use federal funding.”
The nonprofit Tax Foundation said in a report this week that it's more likely the Treasury Department would opt for a 'narrow interpretation that does not unduly tie states' hands” in enforcing the provision.”
Rod Boshart of The Gazette Des Moines Bureau contributed.