SACRAMENTO, Calif. (AP) — Millions of poor and middle-class Californians would get tax rebates of up to $1,100 under a proposal unveiled Monday by Democratic Gov. Gavin Newsom, as part of a broader pandemic recovery plan made possible by an eye-popping $75 billion budget surplus.
Individuals and households making between $30,000 and $75,000 a year would get a $600 payment. All households making up to $75,000 with at least one child, including immigrants in the country illegally who file taxes, would get an extra $500 payment.
“Direct stimulus checks going into people’s pockets — that direct relief, that’s meaningful,” Newsom said during an event in Oakland to announce the plan.
The massive budget surplus is largely due to taxes paid by rich Californians who generally did well during the pandemic, and marks a major turnaround after officials last year said they feared a deficit of more than $50 billion.
The payments will total an estimated $8.1 billion, said H.D. Palmer, a spokesman for the state Department of Finance. The proposal also includes $5.2 billion to pay back rent and $2 billion for overdue utility bills for people who fell behind during the pandemic.
A law passed by voters in the 1970s requires the state to give some money back to taxpayers if the surplus hits a certain limit. The state estimates it will be $16 billion over that threshold. Newsom does not have to act immediately, but is choosing to do tax rebates now, Palmer said.
They are part of what Newsom is calling a $100 billion plan to drive up the state’s economic recovery. He’ll be rolling out details of the plan all week ahead of releasing his revised state budget. The chairs of the state Senate and Assembly budget committees joined Newsom, indicating their support for a proposal that will go before overwhelmingly Democratic Legislature.
It comes as he faces a likely recall election later this year, and his Republican rivals quickly criticized the effort.
“Gavin Newsom is making one-time payments to Californians to avoid being recalled — and only because the law requires him to,” tweeted John Cox, a Republican running to unseat Newsom. “But, Californians can’t be bought.”
It’s the second round of cash payments given by the state in response to the pandemic. Earlier this year, people making less than $30,000 got a $600 payment. Immigrants making up to $75,000 who file taxes, including those also living in the country illegally, also got the check. State officials chose a higher eligibility limit for those people because they didn’t get federal stimulus checks.
All combined, the state would spend $11.9 billion on direct cash payments.
Democratic Assemblyman Phil Ting, the chamber’s budget chair, said the state has the ability to help the neediest people because of how well wealthier Californians did during the pandemic. The state’s budget relies heavily on personal income tax from high earners.
“That budget surplus is going right back to the most vulnerable Californians, the ones who need help the most,” he said.
But some feel the governor could have invested that extra money more wisely.
“Into a rainy day fund, which we might need next year. Who’s to say that things might not get out of control again in a year’s time and California will again be looking at help from the federal government?” said Sanjay Varshney, Sacramento State professor of finance.
Varshney believes more stimulus checks could lead to inflation.
“The price of food has doubled in the grocery stores. The price of lumber has tripled,” Varshney said.
With the state’s economy expected to be fully running by June 15, Varshney believes the stimulus money may not help the economy the way the governor intends.
“They’re going to get these checks, they don’t really need these checks. So, they’re going to save that money somewhere or they’re going to write down debt someplace,” Varshney said. “So, it’s not going to show up in the economy the way people think it’s going to show up in the economy.”