(The Center Square) – Lawyers for the U.S. Department of Treasury are asking a federal judge to throw out Arizona Attorney General Mark Brnovich’s claim it is unconstitutional for Congress to prevent Arizona from using COVID-19 relief money to cut taxes.
Brnovich filed a lawsuit against the Treasury in May to challenge a provision in the American Rescue Plan Act that prohibits the use of the $4.9 billion of federal funds to provide states with tax breaks. Brnovich argued the provision was ambiguous, which he said “renders the tax mandate unconstitutional.” Binding U.S. Supreme Court precedent has held that such ambiguity is fatal, according to the attorney general’s office.
"I will continue to defend Arizona taxpayers and do everything in my power to stop the federal government's brazen disregard for our state sovereignty," Brnovich said in a July 8 statement.
The language in the federal law says states cannot use the federal government funds “to either directly or indirectly offset a reduction in the net tax revenue of each state.” Violations of this provision require the state to repay the government for any tax reduction.
Federal lawyers argue there is no basis to consider Brnovich’s claim regarding the restriction as there has not been a ruling the state violated the provision. The legal arguments follow Gov. Doug Ducey’s recent approval of a $1.9 billion tax cut, though it is not believed Arizona’s historic tax cut violated the restriction. The attorney general's office, however, wants a ruling to ensure if the government later decides the tax cuts constitute an indirect use of federal dollars, Arizona need not surrender any of the federal aid.
After hearing the oral argument June 22, U.S. District Court Judge Diane Humetewa agreed to consolidate the trial and issue a final judgment in thr case. She additionally allowed both sides to file a final brief, which Arizona filed July 7.
Humetewa has not announced the date of her ruling.
Bob Page, public affairs officer at the U.S. Department of Justice, declined to comment.