Federal Court Rules in Favor of KY and TN, Halts Unconstitutional Tax Mandate in ARPA Lawsuit

Published 1:15 pm Monday, September 27, 2021

FRANKFORT – A U.S. district court today ruled in favor of Attorney General Daniel Cameron and Tennessee Attorney General Herbert Slatery III in their lawsuit to stop the Biden Administration from enforcing an unconstitutional tax mandate. The mandate in the American Rescue Plan Act prohibits states from providing tax relief to their citizens.

Attorneys General Cameron and Slatery argued that the tax mandate is unconstitutional and will prevent state legislatures from enacting beneficial tax policies.  The court agreed, writing in the opinion that the federal funds “come with a price—states must forego the exercise of important flexibility and power when it comes to making their own taxing decisions.”

“The court’s ruling returns the power to establish tax policy to the Kentucky General Assembly where it belongs,” said Attorney General Cameron.  “It is unconstitutionally coercive for Kentucky’s acceptance of federal COVID relief dollars to be contingent on the federal government’s tax mandate.  I was proud to defend the Commonwealth’s rights in this important case.”

In their decision, the court ruled that the American Rescue Plan Act’s tax mandates were unconstitutional. The court writes, “Thus, where the federal government unduly influences the States’ power to set their own tax policies, the federal government oversteps its bounds. Not only does this threaten the dual nature of our federalist system, but such federal overreach threatens individual liberties that ‘derive from the diffusion of sovereign power.’”

Access a copy of the court’s opinion here.