Legislative Update

Governor and Democratic Leaders Propose Dueling Fueling Rebates


Two more tax “rebates” were introduced in the past seven days in response to rising fuel prices, and a related tax-relief proposal was killed.

On March 18, Senate President Pro Tem Toni Atkins and Assembly Speaker Anthony Rendon announced a plan to send $200 to California taxpayers – and their household dependents – with income below $250,000. Budget advisers to Atkins and Rendon said approximately 90 percent of taxpayers would receive a check, and the cumulative “rebate” would be $6.8 billion.

On March 23, Governor Gavin Newsom unveiled details for the plan he hinted at during his State of the State Address earlier in the month. The governor proposed sending $400 debit cards to registered vehicle owners, capped at $800 for those who own more than one vehicle. The governor’s announcement, which alternately described the payments as “tax refunds” and “rebates,” estimated that $9 billion would be distributed to taxpayers.

The governor proposed additional provisions: $750 million in incentive grants to transit and rail agencies to provide free transit for Californians for three months, up to $600 million to pause a part of the sales tax on diesel for one year, and $523 million to pause the July 1 inflation increase to the state’s gas and diesel excise tax rates.

An average California driver spends approximately $300 in gasoline excise tax over a year, according to the Governor’s Office.

“Eligibility will be based on vehicle registration, not tax records, in order to include seniors who receive Social Security Disability income and low-income non-tax filers,” Newsom’s press release stated. “The Governor’s proposal does not have an income cap in order to include all Californians who are facing higher prices due to the cost of oil.”

The governor said his staff will meet with legislators to negotiate the details of the proposal, and added, “Once approved through the Legislature, the first payments could begin as soon as July.”

Republican legislators said the proposals from Newsom and the Democratic leaders are unnecessarily complicated and slow, and proposed an alternative plan to knock approximately 50 cents per gallon off the cost of gas by immediately suspending the state excise tax on gas for six months. That proposal, AB 1638, was rejected by Democrats in the Assembly.

There have been five proposals for gas tax relief: Newsom’s “gas tax holiday” announced in January, in which the state excise taxes on gasoline would not be adjusted for inflation, his subsequent plan for the $400 payments, the Democratic leaders’ plan for $200 payments with income restrictions, the Republicans’ plan to suspend the excise tax, and a proposal by a group of Assembly Democrats to offer every taxpayer a $400 payment, described as a “rebate.” (CalTax: None of the proposals has suggested a suspension of the sales tax on motor vehicle fuel, which is a tax on top of existing taxes.)

The debate thus far has been over what amount of relief is appropriate, whether relief should be provided only to those who bought gas, whether the relief should be limited based on income, and how the various plans would affect transportation projects that receive fuel tax revenue.