President Biden, House Speaker Pelosi, and Senate Majority Leader Schumer sent a clear message in their latest COVID relief bill: Increased government spending is fine but cutting state taxes is unacceptable.
In an attempt to prevent states like Iowa from letting residents keep more of their money, the $1.9 trillion American Rescue Plan Act prohibits using any of the $350 billion in State and Local Fiscal Recovery Funds to cut taxes. As written, the bill prevents states from using relief funds "to either directly or indirectly offset a reduction in net tax revenue" that results “from a change in law, regulation, or administrative interpretation during the covered period that reduces any tax (by providing for a reduction in a rate, a rebate, a deduction, a credit, or otherwise) or delays the imposition of any tax or tax increase."
In other words, they are banning tax cuts. This is an astonishing level of federal interference in each state's fiscal affairs.
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