Governor Gavin Newsom and state lawmakers have reached a tentative agreement to send $9.5 billion in tax refunds to Californians, providing a whopping $1,050 to families this fall in much-anticipated financial relief from record-high gasoline prices and other rising costs.
According to the documents outlining the proposal, the plan would provide larger repayments to households earning less money and include an additional payment for dependents.
While Newsom originally hoped to put money back into people’s pockets this summer, disagreements among Democrats in the Capitol delayed the timeline by months. Refunds to offset any state’s highest fuel costs in the nation are unlikely to begin until October if they are approved by lawmakers next week.
The plan to issue refunds is part of a larger agreement on the state budget that the governor and lawmakers are expected to announce soon. The spending plan for the coming year includes increased funding for K-12 education, COVID-19 bonuses for health professionals, money to address drought and wildfires, expanded access to abortion services and other funding priorities from California’s Democratic leaders.
Funding rising gas prices has been at the heart of debate between Newsom and lawmakers over how to spend the state’s excess tax revenue, which is expected to reach $97 billion through next summer. The parties argued for months over who should get refunds and how much they should get.
Newsom eventually gave up on attempting to tie refunds to vehicle ownership through the Department of Motor Vehicles and agreed to a legislative plan to work with the Franchise Tax Board to send direct deposits and debit cards to taxpayers. The Senate and Assembly leaders responded to their call to exclude wealthy Californians from the right to refunds and agreed to a $250,000 income cap for individual taxpayers and $500,000 for joint filers — more than double the limit in their original proposal†
The plan would offer repayments on a sliding scale based on three income levels.
An individual making up to $75,000 per year would receive a $350 refund, which would double to $700 for joint applicants earning as much as $150,000. Households would receive an additional payment of $350 if they claimed dependents, for a maximum refund of $1,050.
At the next income level, single filers making up to $125,000 would get $250 refunds. Households applying jointly and earning up to $250,000 would receive $500. Children or other dependents would qualify taxpayers for an additional $250 payment, qualifying families in the income bracket for a whopping $750 total.
Individuals earning up to $250,000 would receive $200, and joint applicants earning as much as $500,000 would receive $400. Households with dependents would receive an additional $200, making this income bracket eligible for up to $600.
The legislature will vote in a series of bills next week on refunds and a final state budget plan.
Lawmakers approved the provisional budget to meet a June 15 constitutional deadline to avoid having their paychecks forfeited. But they hadn’t made a deal with the governor on rebates or the spending plan and expected many details to change this week.
Under the new agreement, the money for repayments would increase by $1.5 billion over the legislature’s original plan.
The governor outlined an $11 billion proposal in March to give drivers discounts. Lawmakers came up with several ideas that cost less than Newsom’s plan, with many lawmakers looking to spend more state money on infrastructure projects and improvements in their districts.
Efforts to reduce the sting of gasoline prices also come in the middle of an election year and a time when inflation and interest rates are rising, raising concerns about a recession.
Californians paid an average of $6.34 for a gallon of regular unleaded gasoline as of Friday, according to the American Automobile Assn† The state average fell slightly from a record high last week but remains $1.42 above the national average.
The deal on refunds comes after President Biden asked Congress to to approve a gas tax vacation through September, suspending the federal gas tax in an effort to lower gas prices nationwide by 18 cents a gallon. Biden also called on states to similarly suspend fuel taxes to further lower prices.
Republican lawmakers in California have repeatedly criticized Democrats for not taking swift action to lower the cost of gasoline and for rejecting GOP calls to suspend the 51 cents per gallon excise tax on fuel.
Meeting Speaker Anthony Rendon (D-Lakewood) announced a legislative inquiry Monday to determine whether oil companies are “framing” drivers. The Democratic leader said he would appoint a select committee to determine what steps the state can take to lower gas prices, looking beyond just rebates.
The investigation of the select committee follows a Newsom’s previous research asked the California Energy Commission to conduct: found in 2019 that large corporate gas stations “charge higher prices for what appears to be the same product” and raised the possibility that rival oil companies were illegally fixing prices.
This story originally appeared in Los Angeles Times†