California deal to provide relief over inflation would include $1,050 rebates, diesel tax suspension

A budget deal struck between California Gov. Gavin Newsom (D) and the state’s top lawmakers on Sunday would provide most California taxpayers with hundreds of dollars in rebates to alleviate economic hardship from inflation.

The $300 billion framework deal, which has not yet passed the legislature but was endorsed by Newsom, Senate President Pro Tempore Toni Atkins (D) and Assembly Speaker Anthony Rendon (D), would include provisions to suspend the state’s tax on diesel and provide rebates depending on filers’ incomes and dependents.

“California’s budget addresses the state’s most pressing needs and prioritizes getting dollars back into the pockets of millions of Californians who are grappling with global inflation and rising prices of everything from gas to groceries,” the three Democrats said in a joint statement.

The announcement comes after annual inflation spiked in May to 8.6 percent, a roughly 40-year high.

California’s proposed tax refunds are provided through a three-tier system, with higher earners receiving smaller refunds.  

An estimated 17.5 million tax filers would qualify for a rebate, according to a summary of the deal. The plan does not impact roughly 500,000 of the state’s top earners.

Each tax filer would receive a baseline refund that corresponds to their income, but the refund is multiplied if the taxpayer is filing a joint return or has at least one dependent.

The first tier would provide $350 tax refunds to single filers with incomes up to $75,000. The income limit and refunds are doubled for joint filers, and those with at least one dependent would receive an additional $350.

That means qualifying joint filers with at least one dependent would receive the maximum refund under the program of $1,050.

The second tier operates using a similar setup, providing $250 refunds to single filers earning up to $125,000 and $500 refunds for joint filers earning up to $250,000. An additional $250 refund is provided for those filers with at least one dependent.

The third tier includes single filers making up to $250,000, who would receive a $200 refund, and joint filers making up to $500,000, who would receive a $400 refund. An additional $200 is provided if the filer has a dependent.

The deal would also provide $1.4 billion in assistance for people with past-due electric utility bills that were incurred during the pandemic.

Newsom and the state’s top lawmakers are also moving to suspend the state’s diesel sales tax. The state has the highest gas prices in the country, with the average gallon of gas costing $6.32 as of Monday, according to AAA.

The budget deal would reduce costs by about 23 cents per gallon, costing the state $439 million.
President Biden last week called for a suspension of the federal gas tax, also asking the nation’s governors to eliminate their state-level taxes on gas.