Officials in Sacramento all seem to agree on one thing: Californians need money back in their wallets.
With the state’s average gas prices now up to $5.88 a gallon and the cost of essential items like food and clothing racked by inflation, officials have outlined plans to send hundreds of dollars back to taxpayers in recent weeks.
Many of you should expect to see money in your mailboxes within months. But the specifics of who will qualify and if it will be enough to fund a summer road trip are unclear. Gov. Gavin Newsom and legislators have laid out their plans for direct payments, now they will enter into negotiations on how to best funnel money back to struggling taxpayers.
Q. What are the cash relief proposals currently on the table?
Gov. Gavin Newsom’s $400 debit cards for all vehicle owners:
- $400 debit card for each vehicle you own, capped at $800 for two vehicles.
- There is no income limit, meaning all vehicle owners – including electric cars – are eligible under this plan.
- $750 million in “incentive grants” to transit agencies to provide free transit for three months.
- Pausing an estimated 3 cent increase in the gas tax scheduled for July.
Assembly and Senate Democratic leaders propose a minimum $200 rebate for certain households:
- Provide a $200 rebate for every taxpayer making under $125,000 or a $400 rebate in joint-filing households making up to $250,000.
- An extra $200 payment for each dependent with no limit on the number of dependents eligible.
- Example: A family of five would receive $1,000 while a single parent with two dependents would get $600.
The $400 plan for every Californian outlined by a group of moderate Democrats:
- This plan proposes $400 checks for every California taxpayer.
- There is no income limit and the plan is not tied to vehicle ownership.
Q. Why are Democrats arguing about how to send money back?
The main issue with all these differing plans is — who will get the money? Newsom’s plan, for instance, funnels direct payments into the pockets of the state’s wealthiest residents, including billionaires and millionaires, alongside essential workers. The governor’s office said there is no income cap on his plan “in order to include all Californians who are facing higher prices due to the cost of oil.”
But Democratic leadership is less inclined to send money back to wealthy Californians. They want an income cap on the direct payments that would target funds towards people most impacted by rising gas prices. According to one report, low-income households spend about 16% of their earnings on gas compared to 2% for households at the top of the income spectrum.
There is also debate over whether direct financial relief should be tied to vehicle ownership. Newsom’s office said it is relying on vehicle registration to ensure money is provided to seniors who rely on Social Security Disability income and don’t file taxes along with other low-income people that do not file taxes. Meanwhile, the legislators’ plans are linked to tax filings and include people who do not own cars.
Q. What about eliminating Californian’s 51-cent gas tax?
Republicans in Sacramento have been calling on the legislature to freeze California’s gas tax. The state’s gasoline excise tax is among the highest in the country — only Pennsylvania’s is higher — and it adjusts annually for inflation. The hefty tax is largely due to Senate Bill 1, often referred to as the “Gas Tax,” which passed in 2017 after years of studies showed California was falling behind on road repairs. It is expected to generate $8.8 billion this fiscal year that goes toward roadway projects and infrastructure.
Democrats, who hold a supermajority in the state legislature, quickly poured cold water on the Republican proposal. They say that halting the gas tax would upend funding for essential transportation projects. Democrats also argue that it would be a boon for the oil industry since the tax is levied on oil companies that are not forced to pass down their savings to consumers.
A recent report from the non-partisan Legislative Analyst’s Office said that much of savings from a reduced gas tax would likely be passed through to prices at the pump. The LAO added, however, that the exact effect on retail prices is “uncertain.”
While Newsom has opposed halting the entire tax, his latest proposal doubles down on freezing a July increase in the gas tax. The increase, which is pegged to inflation, is estimated to hike the gasoline tax by 3 cents.
Q. When will I see money arrive?
The answer to this question will be hashed out during budget negotiations between the governor and lawmakers this spring. One group of legislators said they will be working to get relief payments out the door in May. However, Newsom’s latest proposal said Californians would see debit cards in the mail starting in July.
Q. So why are California’s gas prices so high in the first place?
Californians are particularly feeling the pinch as the gap between the national average price and the state-wide price was $1.64 as of Thursday, according to AAA.
Much of California’s high prices are due to the gasoline excise tax and costs associated with environmental programs that protect air quality and combat climate change. Still after taking into account these excess costs there is an approximately 30-cent difference between the Golden State and the national average that analysts can’t seem to account for. One economist calls this a “mystery surcharge” and the California Energy Commission said it’s due to higher profit-taking by the oil industry.
Source: www.mercurynews.com