Treasury Secretary Janet Yellen said on Wednesday the department has “a host of thorny questions” to work through before it can give states guidance on a provision in the $1.9 trillion Covid relief package that prohibits them from using federal aid to subsidize tax cuts.
Two issues she singled out: How to treat tax exemptions that states may provide for unemployment benefits, like the federal government is doing, and exactly how to determine whether a state is using federal money for a tax cut.
“We will have to define what it means to use money from this act as an offset for tax cuts. And given the fungibility of money, it's a hard question to answer, but that's what we're required to do, and we will — we will do our best to offer guidance on it,” she told the Senate Banking Committee.
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