House Bill Would Nix Virus Bill's Bar On State Tax Cuts

A House bill released Monday would eliminate a provision in recent pandemic relief law that would allow the federal government to withhold funds from states that lower their taxes.

The State Tax Freedom Act, introduced by Rep. Kevin Brady, R-Texas, would repeal the provision barring states from cutting taxes if they receive relief funds from the American Rescue Plan Act . That legislation, signed March 11 by President Joe Biden, authorized $350 billion in relief for states but barred governments from using the funds to cut taxes. States that don't comply with the provision would be required to repay funds equal to the amount of tax cuts they gave

Treasury Secretary Janet Yellen, in response to a letter from a group of Republican attorneys general that urged her to interpret the provision narrowly, recently said that states can still enact tax cuts as long as they're not offset by federal funds.

On Thursday, Arizona sued the U.S. Department of the Treasury over the provision, arguing the bar threatens state sovereignty.

--Additional reporting by Abraham Gross, James Nani and Dylan Moroses. Editing by Vincent Sherry. 

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