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Treasury Faces 'Thorny Questions' About Restrictions on State Tax Cuts

Treasury Secretary Janet Yellen has concerns

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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