Scott, Colleagues Introduce State Fiscal Flexibility Act
Bill would prevent federal government from banning state tax cuts
WASHINGTON – U.S. Senator Tim Scott (R-S.C.), along with his Republican colleagues on the Senate Finance Committee, introduced 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.”
“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,” said Gov. Henry McMaster. “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.”
The American Rescue Plan includes a $350 billion bailout for states, rewarding those with poor fiscal management and punishing those who operated responsibly during the pandemic. Funds can be used for virtually anything a state chooses to spend money on, with next to nothing in terms of constraints or restrictions. However, there are two restrictions: one is that a state may not use recovery funds “for deposit into any pension fund,” and the other is that any state wishing to provide tax relief may do so, but only at a punishable cost. The latter provision serves no useful purpose, other than to convey the message that tax cuts are not favored by the federal government. The State Fiscal Flexibility Act would eliminate this provision, giving power back to the states to determine what fiscal policies will best serve their citizens.
Text of the legislation can be found HERE. In addition to Senator Tim Scott (R-S.C.), Senator Jim Risch (R-Idaho,) Finance Committee Ranking Member Mike Crapo (R-Idaho), and Finance Committee Members Chuck Grassley (R-Iowa), John Cornyn (R-Texas), Rob Portman (R-Ohio), James Lankford (R-Okla.), Steve Daines (R-Mont.) and Todd Young (R-Ind.) are original co-sponsors of the measure.
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