Treasury Clears States to Cut Taxes -- But Not With Stimulus (1)

The Biden administration said in a response to concerns raised by Republicans that state governments accepting pandemic-relief money from Washington are allowed to cut taxes, but only if they don’t use the federal aid to offset those reductions.

The Treasury Department’s statement addresses a provision in the recently enacted $1.9 trillion stimulus law that provided more than $360 billion in aid to states and cities. The measure said states couldn’t use the money to pay for net revenue reductions through 2024.

The law does not prohibit states from cutting taxes nor does it mandate them to return the funding if ...