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California tax rebates, small business subsidies proposed

Millions of California families would receive cash rebates of $200 per person under a detailed plan unveiled Thursday by state Senate Democrats, with additional boosts to those enrolled in government assistance programs and subsidies provided to small businesses that could be extended for a decade.

The effort to divvy up the state’s towering tax surplus would be more far-reaching than recent proposals by Gov. Gavin Newsom and others to provide one-time cash payments in response to the recent surge in gas prices — ideas that have largely fallen flat at the state Capitol, even as a state gas tax increase looms on the horizon in July.

Instead, legislative leaders have insisted on a more broad-based approach in response to the effects of inflation on Californians.

“With the new revenue available for this year’s state budget, the Senate is doubling down on our priorities,” Senate President Pro Tem Toni Atkins (D-San Diego) said in a written statement.

In all, Democrats said Thursday that they believe the state will have some $68 billion in surplus tax revenues over the next 14 months that can be used in a variety of ways to boost government services as well as the state’s cash reserves. The estimate relies on preliminary data from April tax collections. A more detailed projection is expected in two weeks when Newsom unveils a revised state budget plan.

But all indications are that the state’s tally of tax dollars is historic, even after almost a decade of record-shattering windfalls that helped remake California’s once broken state budget.

Atkins said Thursday that the large surplus would allow the state to “help even more people, bolster their ability to achieve their dreams, and ensure there will be both resources and a more equitable system in place” for the future.

Senate Democrats proposed spending $8 billion on one-time cash rebates for families with adjusted annual incomes of less than $250,000 — $200 per taxpayer and another $200 for each child. For a family of four that meets the income requirements, the state would provide an $800 tax rebate. Leaders of both legislative houses embraced a similar idea last month.

By comparison, the gas price relief plan touted last month by Newsom would cost $9 billion and is limited to vehicle owners with additional subsidies for public transit. The governor also sought to pause this summer’s scheduled increase in gas taxes, an effort that was subject to a deadline this week for state officials to begin preparing for the policy change.

Absent an 11th-hour agreement, California’s fuel excise taxes will go up July 1 by an estimated three cents for a gallon of gasoline and two cents for a gallon of diesel. Those numbers are subject to final calculations of the state’s consumer price index.

A bipartisan group of state legislators unveiled their own plan Thursday that is focused on gas prices, calling for a 12-month suspension of California’s current 51-cents-per-gallon excise tax on gasoline. Those taxes are expected to total almost $7 billion in the current state fiscal year that ends June 30.

But the Senate Democrats’ plan proposed Thursday goes far beyond rebates to cover gas costs.

Democrats also proposed subsidies to California small businesses that will soon be required to make new payments to cover the cost of COVID-19 jobless claims. Unemployment benefits paid during the height of the pandemic were covered by a loan from the federal government that’s scheduled to be repaid, in part, by higher payroll taxes for employers.

Last month, a legislative analysis estimated a typical employer will pay $21 a year more per employee in 2023 and as much as $189 per employee by 2031. Democrats said Thursday that they would commit to a $10-billion subsidy for businesses with as many as 250 employees, paid out over the coming decade.

In broad strokes, the Senate Democrats’ plan would use most of the state’s discretionary tax surplus on one-time items. Families enrolled in the state’s welfare assistance program, CalWORKs, would be eligible for an additional subsidy. Low-income Californians with disabilities would also receive a supplement to their benefits. And grants would be made available to low-income residents whose immigration status keeps them out of the traditional tax filing process.

Billions more would be added to the state’s cash reserves, including “rainy day” funds that were created after California’s last recession for schools and social services programs.



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