Congressman Mike Garcia, R-Santa Clarita, has co-sponsored the “Let States Cut Taxes Act,” which would lift the current restrictions regarding states’ use of coronavirus relief packages for tax net revenue cuts.
Supported by many republican lawmakers from across the country, the act is a response to what many legislators consider a “liberal special interest,” in President Joe Biden’s American Rescue Plan Act of 2021 (ARPA), according to an official statement from Congressman Dan Bishop, R-NC, who introduced the bill.
This act would alter the relief act that Biden signed on March 11, 2021, providing that states do not use the funds, $1.9 trillion total according to an official statement from Bishop’s office, “to either directly or indirectly offset a reduction” in net tax revenue. This restriction would be in place through 2024.
These concerns center around the unease surrounding the restrictions prohibiting tax relief for struggling small businesses, which has been a major focus of the republican party through the coronavirus pandemic, according to Garcia.
“Small businesses in California are hurting and it is imperative they receive the necessary financial assistance needed to keep their lights on and business running,” said Garcia Wednesday. “Putting up barriers to relief only further punishes our small businesses that have been harmed by state-mandated lockdowns.”
In an effort to have their concerns heard, Garcia joined with Republican Leader Congressman Kevin McCarthy R-Bakersfield, Congressman Doug LaMalfa, R-Richvale, and the rest of the California Republican Delegation in sending a letter to Senate Speaker Nancy Pelosi, D-San Francisco.
“A consensus was reached to provide small businesses in California with $6 billion in aid by allowing them to deduct up to $150,000 in business expenses paid with forgiven Paycheck Protection Program (PPP) loans or Economic Injury Disaster Loans (EIDL),” the lawmakers wrote. “Despite this well-known state legislative effort, ARPA contains a contradictory provision that bans States from providing tax relief through December 31, 2024.”
This new bill, introduced by Bishop and co-sponsored by 33 representatives, is posed to remove sections of the ARPA that prohibit states from “directly or indirectly” offsetting a reduction in net tax revenue, requirements for states to submit a report to the federal government on any modifications to tax revenue, and recalling the ability of the federal government to “recoup” any tax revenue lost due to a tax cut.
The current bill does allow states to offset taxes through other means, but does not permit the use of the new relief package to do so.
According to the letter, the opinion of many republican lawmakers is that the federal government should not restrict what states can do with the money given to them through relief packages, that each state should be permitted to allot that money however they see for their unique needs.
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