All California taxpayers would get $400 rebates to defray gas costs under new proposal

SACRAMENTO —  A group of Democratic state lawmakers on Wednesday called for sending a $400 rebate to every California taxpayer to help soften the blow of the recent surge in gasoline prices.

The proposal comes as pressure mounts to help Californians struggling with prices at the pump, as well as increases in the costs of food, rent and other daily essentials. Republican lawmakers have been pushing to temporarily suspend the state’s highest-in-the-nation state gas tax — 51 cents per gallon — but that appears unlikely because of opposition from Democratic legislative leadership.

“This proposed $400 rebate would cover the current 51 cents-per-gallon gas tax for one full year, 52 trips to the pump for most vehicles,” the lawmakers wrote in a letter to Gov. Gavin Newsom, Assembly Speaker Anthony Rendon (D-Lakewood) and Senate President Pro Tem Toni Atkins (D-San Diego).

“Notably, we believe a rebate is a better approach than suspending the gas tax — which would severely impact funding for important transportation projects and offers no guarantee that oil companies would pass on the savings to consumers,” said the letter, obtained by The Times on Wednesday.

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The governor has been working with the Legislature to craft a tax relief package after promising in his State of the State address last week to put money “back in the pockets” of Californians who have been stung financially by the sharp rise in gas prices.

Newsom administration officials have said that several ideas are under consideration, although suspending or reducing the state gas tax does not seem likely. Rendon and Atkins released a joint statement last week dousing the idea, saying it would not provide substantial assistance and could reduce funding for crucial road and bridge repairs statewide. Instead, they favored general tax relief to help Californians struggling with rising costs — not only for gas but for food, rent and other life essentials.

The proposal announced Wednesday came from a group of 10 Democrats — Assemblymembers Cottie Petrie-Norris of Irvine, Cecilia Aguiar-Curry of Winters, Rebecca Bauer-Kahan of Orinda, Jesse Gabriel of Encino, Adam Gray of Merced, Jacqui Irwin of Thousand Oaks, Evan Low of Campbell, Blanca Rubio of Baldwin Park, Sharon Quirk-Silva of Fullerton and Carlos Villapudua of Stockton — and one independent, Assemblymember Chad Mayes of Yucca Valley.

Several of the lawmakers are generally viewed as business-aligned moderates in the Assembly Democratic caucus. They have scheduled a Thursday press conference to provide more details.

Republican leaders quickly threw their support behind the measure, though they still vowed to push for suspending the gas tax.

“This bill should be fast-tracked to the Governor’s desk and targeted to working Californians who actually feel the pain at the pump,” Assembly Republican Leader James Gallagher of Yuba City said in a statement Wednesday evening.

The proposal, the lawmakers said in their letter to Newsom, should be considered as part of the state budget negotiations that will begin in late spring. Early estimates of the size of California’s tax surplus have varied and won’t become more clear until after taxpayers file their returns next month. Even so, most estimates have been far larger than the projected $9-billion cost of the Democratic effort.

Though lawmakers are focusing on the benefit to all taxpayers — including those without legal immigration status — California’s tax structure is sharply tilted toward high-income earners. Data compiled by the state Franchise Tax Board show that almost 1 in 4 tax returns filed in 2019 came from taxpayers with an annual adjusted gross income of more than $100,000.

More than 1.4 million taxpayers, using the 2019 data — earning more than $200,000 a year — would be eligible for $400 rebates under the plan at a cost of almost $567 million. More recent tax data might increase the total amount of the rebate going to high-income earners.

The proposal, should it be embraced by Newsom and signed into law, would probably come the closest of any current effort to fulfilling the promise of California’s voter-approved government spending limit. The 1979 law requires a mix of taxpayer rebates and new school funding when revenues grow faster than most general government spending over a two-year period. Analysts have projected that the state is likely to breach the spending limit by next year. Last year, Democrats avoided sending out across-the-board rebates by instead spending almost $12 billion on a COVID-19 pandemic stimulus program open to Californians who earn $70,000 a year or less.

In 2017, the Democrat-controlled Legislature passed Senate Bill 1, which then-Gov. Jerry Brown signed into law, levying the state’s first gas tax increase in 23 years — 12 cents per gallon — to repair California’s roads and bridges. Under the law, the tax increases each year on July 1 based on growth in the California consumer price index.