Deal reached on plan for more than $9 billion in gas refunds to California drivers

Gov. Gavin Newsom and state lawmakers have reached a tentative agreement to send Californians $9.5 billion in tax refunds and families up to $1,050 this fall in long-awaited financial relief from record-high gasoline prices and other increases provide costs.

According to documents outlining the proposal, the plan would give households earning less money bigger refunds and include an additional payment for dependents.

Though Newsom initially hoped to put money back in people’s pockets this summer, disagreements among Democrats in the state Capitol delayed the schedule by months. Refunds to offset a state’s highest fuel bill in the nation likely won’t go out until October, when approved by the Legislature next week.

The plan to issue refunds is part of a larger state budget agreement that the governor and lawmakers are expected to announce soon. Next year’s spending plan includes more funding for K-12 education, COVID-19 bonuses for healthcare workers, money to fight drought and wildfires, expanded access to abortion services, and other funding priorities of California Democratic leaders.

Covering rising gas prices has been at the heart of the debate between Newsom and lawmakers over how to spend the state’s excess tax revenue, last estimated at $97 billion through next summer. The sides have been at odds for months over who should get refunds and how much they should get.

Newsom eventually abandoned efforts to tie refunds to vehicle ownership through the Department of Motor Vehicles and agreed to a legislative plan to work with the Franchise Tax Board to send direct deposits and debit cards to taxpayers. Senate and Assembly co-chairs compromised their call to bar wealthy Californians from being eligible for reimbursements, agreeing to an income cap of $250,000 for individual taxpayers and $500,000 for joint taxpayers — more than double the limit in their original proposal.

The plan would provide reimbursements on a graduated scale based on three income brackets.

A person earning up to $75,000 per year would receive a refund of $350, which would double to $700 for joint applicants earning up to $150,000. Households would receive an additional payment of $350 if they claimed dependents, for a maximum refund of $1,050.

At the next income level, individual filers earning up to $125,000 would get a $250 rebate. Households applying together and earning up to $250,000 would receive $500. Children or other dependents would qualify the taxpayer for an additional payment of $250, giving families in the income bracket entitlement to a total of up to $750.

Individuals earning up to $250,000 would receive $200, and joint applicants earning up to $500,000 would receive $400. Households with dependents would receive an additional $200, making this income bracket eligible for a maximum of $600.

The Legislature will vote on a series of bills on refunds and a final state budget next week.

Last week, lawmakers sent Newsom an interim state budget totaling more than $300 billion, a framework that included their original proposal to provide $8 billion in tax refunds.

Lawmakers passed the interim budget to meet a constitutional deadline of June 15 to avoid forfeiting their paychecks. But they hadn’t reached an agreement with the governor on rebates or the spending plan and expected many details to change this week.

Under the new agreement, reimbursement funds would increase by $1.5 billion over the Legislature’s original plan.

The governor outlined an $11 billion proposal in March to give drivers rebates. State legislators offered various ideas that cost less than Newsom’s plan, and many state legislators wanted to use more federal funds for infrastructure projects and improvements in their districts.

Efforts to ease the sting of gas prices also land in the middle of an election year and at a time when inflation and interest rates are rising, adding to fears of a recession.

Californians paid an average of $6.34 for a gallon of regular unleaded gasoline on Friday, according to the American Automobile Assn. The state average is down slightly from a record high last week, but remains $1.42 above the national average.

The refund agreement comes after President Biden asked Congress to authorize a gas tax holiday through September and suspend the state gas tax to cut gas prices statewide by 18 cents a gallon. Biden also urged states to similarly suspend fuel taxes to further drive down prices.

Republican lawmakers in California have repeatedly criticized Democrats for failing to take quick action to reduce gasoline costs and for rejecting demands from the GOP, the state’s 51-cent-per-gallon excise tax on fuel to suspend.

Assembly Speaker Anthony Rendon (D-Lakewood) announced Monday a legal probe to determine whether oil companies are “rip-off” drivers. The Democrat leader said he will appoint a select committee to determine steps the state can take to lower gas prices, looking beyond mere rebates.

The panel’s investigation follows an earlier investigation Newsom asked the California Energy Commission to conduct in 2019, which found that gas stations owned by large companies charge “higher prices for what appears to be the same product” and raised the possibility that competing oil companies were engaging in illegal price fixing operated . Deal reached on plan for more than $9 billion in gas refunds to California drivers

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