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California tax relief: What’s in the tentative deal

052522-GAS-PRICES-FILE-MHN-CM.jpg
Martin do Nascimento
/
CalMatters
The cost of gas at an ARCO station in Oakland on May 25, 2022.

After weeks of talks, state lawmakers are told there is a tentative agreement on California tax relief between Gov. Newsom and legislative leaders. It includes refunds of as much as $1,050, but officials caution that the deal isn’t final.

Gov. Gavin Newsom and legislative leaders have reached a tentative agreement to provide as much as $1,050 to millions of California families to help with rising gas prices and inflation, according to emails sent last week to Democratic members of the state Senate and Assembly.

The three-tier program would benefit an estimated 17.4 million California taxpayers, including individual filers making as much as $250,000 and joint filers making as much as $500,000, according to the outline obtained by CalMatters, with low- and middle-income households set to receive incrementally more money.

The plan is part of a broader $300 billion budget deal that state leaders continue to negotiate ahead of the July 1 start of the fiscal year.

Though the email to Democratic senators and their chiefs of staff called the rebate proposal an “agreement,” a spokesperson for Senate President Pro Tem Toni Atkins, a San Diego Democrat, cautioned today in a statement that “any tentative agreement can unravel.”

Anthony York, a spokesperson for Newsom, reiterated that point, denying there was a deal because details could still change until a final budget compromise is publicly announced.

“We’re not taking any issue off the table until the entire budget’s done,” he said.

Under the plan, households making as much as $75,000 for individuals or $150,000 for joint filers would receive $350 per taxpayer, plus an additional $350 if they have at least one dependent. So a single parent would receive $700 and two-parent families would receive $1,050.

The amount would decrease to $250 per taxpayer for households making as much as $125,000 for individuals or $250,000 for joint filers, and to $200 per taxpayer for households making as much as $250,000 for individuals or $500,000 for joint filers. In both of these tiers, parents would receive an additional $250 or $200, respectively, if they have at least one dependent.

Californians with incomes above $250,000 for an individual or $500,000 for joint filers would not receive a rebate. The plan would also include an increase to recipients of Supplemental Social Security who do not file taxes.

“The plan recognizes that some people are hurting more than others and gives them greater relief,” according to the messaging email sent to Assembly Democrats, which estimates the overall cost of the rebates at $10 billion.

Differences in proposed spending for universities, housing and social safety net programs, as well as the details of a major climate package, lingered as the Legislature passed a placeholder budget earlier this month. But the biggest holdup to a bargain, which must go into print by Monday in order to pass before lawmakers leave for summer recess at the end of the month, has been the dispute over direct financial assistance for taxpayers.

Newsom and legislative leaders were at odds for months over whether to target the relief at drivers or the neediest Californians.

During his State of the State speech in March, the governor called for a plan to address spiraling gas prices, which have since reached an average of more than $6 per gallon. He proposed to send $400 debit cards to every registered vehicle owner in the state, up to two per person.

Legislative leaders firmly resisted that approach, which did not include an income limit. Progressive critics noted that it would benefit millionaires and billionaires while leaving out Californians too poor to own their own cars.

The tentative agreement is much closer to the program that Atkins and Rendon devised, under which the state would have cut $200 checks for each eligible taxpayer and their dependents living in households making less than $250,000 per year for a couple or $125,000 per year for an individual.

Despite growing demands from Republican lawmakers, plus an increasing number of Democrats, the plan does not include a suspension of the state’s gas tax, which is set to increase by three cents on July 1.

CalMatters is a nonprofit, nonpartisan media venture explaining California policies and politics.