More than a month after Governor Gavin Newsom pledged to give Californians cash to offset rising gas prices, he and state lawmakers have yet to find ground. agreed on the most basic details of the plan: who should be eligible for reimbursements and how much should they receive?
The governor and lawmakers are also at odds on broad issues such as how much of California’s record tax revenue should be returned to residents and where refunds should fall in the hierarchy of other state needs.
“It’s certainly not a lack of focus and hard work,” Senate Pro Tem Chairman Toni Atkins (D-San Diego) said of the slow negotiations. “It’s more really trying to land in place than we think is appropriate. On our end, there just isn’t much point in providing checks to the wealthiest Californians.
Gasoline prices in the state are starting to fall from this year’s highs, but the average price of $5.73 for a gallon of regular unleaded gasoline remains $1.79 above what the Californians paid at the pump a year ago and $1.65 higher than the current national average, according to American Automobile Assn. given on Wednesday.
With higher transport costs pushing up the price of food and other goods, state leaders hope to reach an agreement soon and provide funds to residents this summer. Yet little progress had been made by the time the Legislative Assembly broke its spring recess last week.
The plan Newsom proposed last month would provide at least a $400 refund to every registered vehicle owner in the state, regardless of income. Reimbursements would be capped at $800 for anyone with more than one vehicle registered in their name.
His office also released draft legislation last week on a package of fuel price relief bills that includes $750 million in grants to transit agencies to offer free fares for three months. , the elimination of the sales tax on diesel fuel for a year and the suspension of a fuel excise tax increase that is expected to take place in July.
But Newsom’s proposal raises equity concerns for Democratic lawmakers, who say they can’t justify returning money to the top earners while omitting some of the poorest. Californians in carless households were more than twice as likely to live in poverty as those with cars in 2019, according to an analysis by the California Budget & Policy Center, a nonprofit that advocates for programs that benefit people. low-income residents.
‘My wife and I don’t need the extra money, but people struggling in the lower income brackets should get a little more,’ said Assembly Speaker Anthony Rendon (D -Lakewood).
HD Palmer, spokesman for the governor’s budget office, said Newsom’s proposal prioritizes drivers at all income levels and excludes those without cars from receiving reimbursements. because it’s a direct response to gas prices.
“The focus of the governor’s proposal has been on people paying at the pumps,” Palmer said.
He said one way to limit reimbursements for drivers is to cut payments for those with high-value vehicles who pay more than a yet-to-be-determined amount in license fees. California vehicle registration fees are included in the annual registration fee and calculated based on the purchase price or value of the car.
In total, Newsom’s office projects the governor’s plan would cost more than $11 billion if it included reimbursements for all vehicle owners.
California is among several states considering tax relief as gas prices and inflation drive up the cost of living. New Mexico lawmakers have approved income tax refunds of $500 for joint households with annual incomes below $150,000 and $250 for single filers with incomes below $75,000 . Other states, such as New York and Florida, plan to temporarily eliminate gasoline taxes.
Although economists debate the benefits of sending one-time checks to taxpayers, tax refunds tend to be popular during election years. Newsom championed the Golden State Stimulus last year in response to the economic effects of the COVID-19 pandemic, with the first batch of $600 checks delivered to Californians two weeks before the Sept. 14 recall election.
Discussions of the refund proposals have been inspired, in part, by the likelihood that California tax revenue will exceed the state’s constitutional appropriations limit and trigger restrictions on how lawmakers spend the excess revenue.
Under the 1979 law, lawmakers could reduce revenue and avoid hitting the credit limit by giving money back to Californians through rebates or expanding tax credits, or by increasing funding for local governments, infrastructure projects or state emergencies, according to a report by the Office of the Independent Legislative Analyst. If no action is taken and revenue exceeds the threshold over a two-year period, the excess cash will have to be split between schools and taxpayer refunds.
At the heart of the debate among Democratic lawmakers is whether some of the money proposed for refunds would be better spent on other needs. Atkins and Rendon presented their own plan last month which they said would cost significantly less than Newsom’s at around $6.8 billion and would not depend on owning a vehicle.
Legislative leaders instead support broader refunds through payments of $200 for each California taxpayer and dependent. Eligibility would be limited to individuals earning up to $125,000 per year or households with annual taxable income not exceeding $250,000.
State Sen. Ben Allen (D-Santa Monica) is among a contingent of lawmakers who would rather offer a more limited tax refund than what Newsom or legislative leaders have proposed and instead target payments to low-income Californians. income, leaving more money. for infrastructure projects. Allen suggested funding improvements to school facilities, new housing for the homeless, better access to clean water, improvements to the transportation system and other pressing issues.
“I think we would be making a mistake if we ignored our state’s very important infrastructure needs in this conversation,” Allen said. “California’s infrastructure is creaking and part of our ability to stay competitive as a state and as an economy will involve making sure we have the infrastructure to take our economy to the next level and the quality life at the next level.”
He also said the state should save more money now for a future recession. Fears of an economic slowdown rise as rates and the cost of borrowing rise in the United States
“There’s so much desire to spend money and pay back money and all that, but I know this flush fiscal moment is very temporary and we’ll regret not being more careful if we go from there. before with all the plans that various people have come up with,” he said.
Atkins said she expects a final deal to include both targeted refunds and money for the kinds of investments Allen and others are advocating. Palmer said Newsom hopes to sign gas relief legislation before unveiling a revised state budget in mid-May.
“I wish we had reached an agreement sooner, but I understand why that didn’t happen,” Atkins said, adding that she was speaking with Rendon and Newsom together this week. “Hopefully we can do this quickly.”