SC Leaders Fight “Blue State Bailout” Overreach

Jobs & Economy
March 17, 2021

Palmetto Promise Team

President Biden’s “American Rescue Plan” is a budget-busting boondoggle, shoveling out cash as fast as Washington can print (and borrow) it.

But not just content to bail out their cronies in fiscally-irresponsible Blue States like IL, CA, and NY, Biden, Schumer, and Pelosi go even further, potentially hamstringing the ability of state like South Carolina to spend the federal windfall wisely by cutting taxes or replenishing unemployment insurance and pension funds.

As the Wall Street Journal Editorial Board recently wrote:

“Beltway Democrats are essentially barring GOP-led states from improving their competitiveness against high-tax Democratic states.

Democrats in California recently approved $600 stipends for low-income residents and undocumented immigrants, and these and other handouts to liberal constituencies appear permissible under the bill as “assistance to households.” A corporate tax cut? No way.

The constitutionality of this is open to question. The Supreme Court’s “anti-commandeering” doctrine prohibits Congress from using federal funds to coerce states. But even if the tax cut ban doesn’t meet the Court’s legal test of coercion, it’s still an egregious affront to constitutional federalism. In the 2020 election, Democrats failed in their goal of retaking statehouses, but now they plan to control them anyway from Washington.”

Thankfully, South Carolina officials are leading efforts to push back hard against this massive federal overreach.

SC Attorney General Alan Wilson joined a letter signed by twenty-one state attorneys general urging the U.S. Department of Treasury to take immediate action to ensure that the Biden Blue State Bailout “does not strip states of their core authority to implement basic state tax policy.”

“Nothing is more important to the principle of state’s rights than the right of South Carolina to cut taxes if it so chooses,” Attorney General Wilson said in a statement. “I will most certainly defend against any Federal intrusion on our State’s right to reduce tax burdens on its citizens.”

U.S. Senator Tim Scott sprang into action to introduce the State Fiscal Flexibility Act, a bill to eliminate a provision in the American Rescue Plan that prevents states from using relief funds to cut taxes.

“Democrats slipped in language in their progressive payment plan that not only infringes upon the rights of states, but also penalizes states that have remained financially responsible throughout the pandemic,” said Senator Scott. “South Carolina knows how our money should be used better than any federal bureaucrat in Washington. The State Fiscal Flexibility Act will ensure that our state leaders are able to continue making the best economic decisions for South Carolinians and not at the mercy of liberal politicians.”

Governor Henry McMaster added, “Because of our history of conservative, responsible spending, South Carolina is one of the few states in the country that will have a budget surplus at the end of this fiscal year. Under Congressional Democrats’ absurd plan, that responsibility could be punished if we use this surplus to provide tax relief to our people while states with massive budget shortfalls would be bailed out. I applaud Senator Tim Scott and his colleagues for fighting this egregious, partisan federal overreach.”

We’ve said for years that South Carolina must cut its highest-in-the-Southeast income tax rate. Washington shouldn’t have the power to tell us we can’t.