Kansas AG urges feds to respect states’ ability to set tax policy

Published: Mar. 17, 2021 at 11:38 AM CDT
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TOPEKA, Kan. (WIBW) - Kansas Attorney General Derek Schmidt is urging the federal government to respect states’ ability to set their own tax policy.

Kansas Attorney General Derek Schmidt says U.S. Treasury Secretary Janet Yellen needs to take immediate action to make sure a provision of the American Rescue Plan does not intrude on states’ authority to set their own tax policy.

AG Schmidt said he joined 20 other state attorneys general in a letter to Sec. Yellen about provisions of the most recent federal stimulus act that disallows states from using COVID-19 relief funds to “directly or indirectly offset a reduction in... net tax revenues,” which come from state laws or regulations that reduce tax collections, whether by cutting rates or giving rebates, deductions, credit or more. He said he warns that unless interpreted narrowly the provision could deny Kansas and other states the authority to change state taxes in a way that would result in less revenue, even if the state would have made the change without the relief funds.

According to Schmidt, he and his colleagues urge the Treasury to adopt a narrow interpretation of the language and warn that a broad interpretation would bring about an unprecedented and unconstitutional intrusion on states’ rights. He said the letter notes several tax proposals now pending in state legislatures, including two proposals in Kansas, that could be called into question if the statute were interpreted broadly.

Schmidt said the letter also warns that a single governor could accept relief funds and bind both the state legislature and a future governor from taking any action that reduces tax collections in the near future. He said this would be an intrusion by Congress on the democratic structures of the States.

AG Schmidt said he is asking the Treasury to confirm by March 23 that the provisions do not prohibit States from providing tax relief but precludes the use of relief funds to provide direct tax cuts. He said he and his colleagues noted they could take further appropriate action if the necessary assurance is not given.

To view the full letter, click HERE.

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