Home > Uncategorized > Chuck Schumer’s 11th Hour Amendment Protects State and Local Governments from Transferring Rescue Funds to Corporations… and the GOP is NOT Happy

Chuck Schumer’s 11th Hour Amendment Protects State and Local Governments from Transferring Rescue Funds to Corporations… and the GOP is NOT Happy

March 19, 2021

Newsweek’s Julia Rock describes an 11th hour amendment to the American Rescue Plan (ARP) introduced by NYS Senator Chuck Schumer that forbids the use of ARP funds to reduce taxes, an action that the GOP finds abhorrent. She opens her essay with this description of the amendment:

The American Rescue Plan’s $1.9 trillion of spending represents a significant break with the budget-cutting, deficit-obsessed austerity ideology that has held sway since the Reagan Era. But that’s not all it does. A provision tucked into the final bill also aims to halt the anti-tax movement that has drained state and local coffers of resources to fund infrastructure, public education, and other basic social services.

The language, slipped into the legislation at the last minute by Senate Majority Leader Chuck Schumer, is designed to prevent federal money from subsidizing new tax cuts at a moment when some Republican-led states have been considering them.

Money from COVID relief needs to go to helping every day Americans get through the pandemic, not paying for tax cuts for the rich,” Schumer said in a statement to The Daily Poster. “The American Rescue Plan explicitly prohibits states from using emergency COVID relief dollars to fund frivolous tax cuts. Governors should use this money to maintain public health and social assistance programs to fight the pandemic, and keep millions of other essential employees on the job and working for our communities.”

Ms. Rock describes the reaction from the GOP, which ranges from dismay to outrage as many States were hoping to cut taxes in an effort to ostensibly help the business climate. But, as Ms. Rock notes, that will not help local businesses nearly as much as a robust local government:

The injection of funds from the ARP into state and local governments allows for investments in the systems whose vulnerabilities have been laid bare by the pandemic, such as public education, state unemployment systems, and health care. These investments have a high economic multiplier, meaning each dollar spent on things like schools, parks and recreation, and public health creates more than a dollar’s worth of resulting economic growth.

But the full benefits of the aid could be largely cancelled out if politicians used the funds to justify slashing taxes, cutting off revenues these governments need for their full recovery.

“It very much would not boost the economic recovery if states then send that money to high-income people who have done well during this pandemic,” said Auxier, the Tax Policy Center expert.

And, as Ms. Rock notes in her article, the enforcement of this provision of the ARP may defy easy enforcement. What Ms. Rock DOESN’T emphasize is that there IS a precedent for this kind limitation on tax cuts. Title One funds have always required districts to prove that they were not displacing local funds and if their regulators found out that the district was doing so they would be required to reimburse the government— the same kind of provisions that Schumer has built into ARP. There is (or at least WAS a decade ago when I worked in schools) careful monitoring of the use of these federal funds by USDOE staff. Which brings into play an important reality: the enforcement of strictures like the one Schumer appended to ARP require additional government oversight— and that tends to be unappreciated by many voters, even those who would benefit most from the close monitoring.

Will Schumer’s amendment make a difference? Given the cut-off-your-nose-to-spite-your-face recalcitrance of some GOP state leaders and statehouses and the advice of the Heritage Foundation, it might not. Here’s the distressing concluding paragraph to Ms. Rock’s article:

…there is a chance that Republicans-led states could refuse to take the ARP’s federal aid because of the constraints on tax cuts, just like they have done in the past with refusing to allow Medicaid expansion. The Heritage Foundation is now telling Republican governors to “reject these federal bailouts, because they will make cutting taxes harder and make growing the size and scope of government easier.”

Heaven forfend state and local taxes become easier to collect!

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