Attorneys General Eric Schmitt of Missouri and Derek Schmidt of Kansas are at it again.
The two have co-signed a letter to the Treasury Department expressing outrage that the new COVID-19 bill blocks states from using their federal grants to pay for, what else, massive tax cuts.
“Such federal usurpation of state tax policy would represent the greatest attempted invasion of state sovereignty by Congress in the history of our Republic,” the letter says.
Really? George Wallace, call your office.
The COVID-19 relief bill sends $350 billion to state and local governments to help them recover from the pandemic. The idea is to use the cash to pay for teachers and firefighters and health care costs, and to plug holes in state budgets decimated by unemployment.
Kansas is scheduled to receive roughly $1.6 billion and Missouri, $2.8 billion.
At the insistence of West Virginia Sen. Joe Manchin, however, the law precludes states from cutting their own taxes and then using the federal cash to bail them out. This makes enormous sense: The federal money is a one-time supplement, not a replacement.
Imagine your reaction if your boss offered you a one-time 10% raise, but took away your health insurance forever. You’d be no better off. The same principle applies here.
To Schmitt and Schmidt, however, and 19 other Republican attorneys general, it’s a legal disaster. “Fundamental to our Constitution is separate federal and state sovereigns, who can each set their own taxing policies based on their own independent legislatures,” the letter says.
Sure they can. But state legislators retain their power to set tax policy under the new law. What they cannot do is slash taxes and plug federal dollars into the budget hole.
There’s a way out of the mess. Kansas and Missouri could simply refuse to take the coronavirus relief money and cut taxes to their hearts’ content, as Schmitt and Schmidt know, or should know.
That would be incredibly dumb, and would seriously damage both states. But it could be done, and we know that because Kansas and Missouri have done it before, with Medicaid expansion.
For years, both states have refused billions of dollars in federal money to expand Medicaid. It’s been foolish, but it was — and is — legal. The two states could turn down COVID-19 money, too.
Schmitt and Schmidt seem to understand this. They just don’t like it. “Many states put to the Hobson’s choice of taking this financial support or maintaining their sovereign independence … will be hard pressed to decline the federal funds,” the letter says, in a desperate attempt to have it both ways.
While both AGs are wrong on the law, they’re also wrong on the policy. The federal money only lasts for a year or two. After that, states that permanently reduce tax rates will be faced once again with cutting services to balance their books.
Cutting taxes across the board now would create enormous hardship a few years from now.
We’d urge Kansas and Missouri to approach the federal grants with the same caution cities should use: modest state worker wage increases, expanded health programs, money to protect schools, one-time building projects, and fund reserves.
