Gov. Gavin Newsom on Wednesday released the long awaited details of his tax refund plan to send $400 to Californians for each registered vehicle, a move that would put more money in the pockets of families who own more cars — even the state’s wealthiest residents — and exclude those without cars from receiving the payments.
Newsom’s $11-billion proposal is designed to offset the rising prices consumers are paying at the pump and also includes savings for those who rely on public transportation. The plan would include $750 million in grants for free or substantially reduced public transit fare, but Californians who don’t own a registered vehicle would otherwise not receive a refund.
The governor, who is up for reelection this year, would cap payments at $800 for any person with more than one registered vehicle, though households with multiple vehicles registered to different family members could receive far more than that amount.
Newsom’s plan would be subject to approval by the state Legislature and could set him up for a potential battle with leaders of the Senate and Assembly, who introduced their own proposal last week to provide financial relief from the increasing costs of all goods with more money for families.
The plan from Senate President Pro Tem Toni Atkins (D-San Diego) and Assembly Speaker Anthony Rendon (D-Lakewood) centers on $200 refunds for each taxpayer and dependent, and excludes the wealthiest 10% of earners.
“I appreciate Gov. Newsom’s work on developing another option to bring relief to Californians experiencing the rising cost of fuel and consumer goods,” Atkins said. “The Senate is focused on ensuring that state money is targeted to those who actually need relief, and we look forward to working with Gov. Newsom, Speaker Rendon and our Legislative colleagues to quickly develop a proposal that delivers for struggling Californians.”
The governor’s office said Newsom is open to discussing ways with the Legislature to eliminate refunds for high-value cars, but his proposal is currently structured to send payments in the form of $400 debit cards to all vehicle registrants regardless of income.
Newsom unveiled his plan two weeks after he teased in his State of the State speech that he would put more money back in the pockets of Californians to address higher gasoline costs. An advisor to Newsom told reporters after the speech that the refunds would likely go to vehicle owners. Newsom’s office initially distanced itself from those comments before eventually settling on an approach that ties refunds to drivers.
Environmentalists have argued that tying refunds to vehicle ownership conflicts with the state’s effort to reduce reliance on fossil fuels and remove cars from the road. Newsom’s office said his plan will offer the same refunds for electric vehicle owners and includes a call to accelerate his January budget proposal for more funding for zero-emission vehicles and infrastructure, though that funding is not included that in his $11-billion plan.
The decision to exclude Californians who don’t own a car from receiving payments also raises questions about equity. Though some families could still save hundreds of dollars on public transit costs, the proposal could disproportionately benefit those with the financial means to own a car or multiple cars.
A new report by the nonpartisan Public Policy Institute of California found that higher-income families buy more gas. But families in the state’s lowest and middle income brackets spend a larger portion of their budgets on gasoline than high-income families, according to the report.
And while some families cannot afford to own a car, rising gas prices are driving up transportation costs for other goods that are similarly passed along to consumers.
Rendon has been adamant that he would not support any plan to provide refunds to the ultra-rich.
“A lot of people have suffered recently,” Rendon told The Times last week. “A lot of Californians have been struggling, and we’re looking for a solution to provide financial support for those Californians in particular.”
The speaker’s comments came in response to a proposal led by a group of mostly moderate Democrats in his caucus and one independent to provide a $400 rebate to every Californian regardless of income level.
The lawmakers said the $400 sum would cover the current 51 cents-per-gallon gas tax for one full year calculated on one trip to the pump per week for most vehicles.
That plan would cost the state $9.2 billion, according to a cost comparison by advisors to the legislative leaders. The price tag of Atkins and Rendon’s proposal would likely hit $6.8 billion.
Newsom’s proposal would likely cost the most at $11 billion, which includes $9 billion in tax refunds to drivers, $750 for public transit grants, another $600 million to pause the sales tax on diesel for one year and $523 million to pause inflation increases to gas and diesel excise taxes.
The various efforts to defray the rising cost of gasoline come in the middle of an election year and at a time when inflation and interest rates are on the rise, elevating fears about the economic future and financial pressures on people in California and nationwide. All of the proposals to provide a cash supplement to millions of Californians rely on using a portion of the state’s surplus tax revenues.
Newsom’s fiscal advisors and independent analysts have projected the state will have some $30 billion in excess cash by early next summer. That estimate will be updated in May, when the governor sends legislators a revised budget plan — one based on the income tax filings of Californians made by April 15. And it’s possible the state’s budget surplus could be even larger than the early projections.
In January, Newsom proposed pausing a gas tax increase for a year slated to take effect in July, which legislative estimates suggest could cost $500 million in transportation revenues, or amount to about $15 in savings per driver.
Though supported by some Republicans, many Democratic lawmakers pushed back on the idea saying it could reduce necessary funding for transportation projects. Newsom’s proposal unveiled Wednesday continues to embrace the idea, one that would cancel annual inflation adjustments to gas and diesel excise taxes.
The governor’s office said Newsom hopes to reach an agreement on details of the refund with lawmakers before he unveils his revised budget plan in May, a timeline that would allow early action on his proposal.
Sacramento bureau chief John Myers and Times staff writer Mackenzie Mays contributed to this report.