SACRAMENTO, Calif. — Californians shouldering the nation’s highest gas prices could soon get a tax break, free rides on public transit and up to $800 on debit cards to help pay for fuel under a proposal revealed Wednesday by Democratic Gov. Gavin Newsom
Gas prices have soared in recent weeks, the result of pandemic-induced inflation and Russia’s invasion of Ukraine. State governments across the country have been debating what to do about it, with the most popular choices being slashing fuel taxes or offering rebates to taxpayers. Last week, the governors of Maryland and Georgia signed laws temporarily suspending their state’s gas taxes, while Georgia on Wednesday also offered $1.1 billion in refunds to taxpayers in a separate action.
California’s average gas prices hit a new state record Wednesday at $5.88 per gallon, more than $2 higher than it was a year ago, according to AAA. California has the second-highest gas tax in the country at 51 cents per gallon. But the state’s Democratic leaders have been wary of suspending the gas tax because they fear oil companies would not pass along the savings to drivers.
Instead, they want to send money directly to taxpayers.
The governor’s office says the average California driver spends about $300 per year on gas taxes. Newsom’s idea is to give car owners $400 debit cards for up to two vehicles, for a total of $800. The money would go to everyone who has a car registered with the state — including the uber-rich, people living in the country illegally, and even drivers who own vehicles that don’t use gasoline.
For people who don’t have cars, Newsom wants the state to pay for their bus or train fare for three months. His proposal would give $750 million to transit and rail agencies, which Newsom said would be enough to give free rides to 3 million people per day. About $1.1 billion would pay to pause scheduled inflationary increases for diesel and fuel taxes this summer, and another $500 million would pay for projects that promote biking and walking.
“This package is also focused on protecting people from volatile gas prices, and advancing clean transportation,” Newsom said.
Rising fuel prices are a tricky policy issue for Newsom, who is trying to wean the state off fossil fuels. He has signed executive orders aimed at banning the sale of new gas-powered cars in the state by 2035 and halting all oil extraction by 2045. He has proposed a total of $10 billion in funding over six years to boost zero-emission vehicle production and build charging stations.
Higher gas prices typically inspire people to be more thoughtful about their vehicle use by walking more or eliminating unnecessary car trips, said Laura Deehan, state director for Environment California, a nonprofit that advocates for an end to fossil fuel use. Giving people money for gas would encourage them to drive more, she said.
Instead, she said Newsom should spend the $9 billion on programs aimed at getting people out of gas-guzzling cars.
“Just giving out these rebates to anyone who has a car in the state isn’t going to help us in the long run move away from the volatility that comes with our dependence on fossil fuels,” she said.
Newsom’s plan must be approved by the Legislature, where Democrats dominate both the Assembly and the Senate. Democratic leaders, however, don’t like the idea of giving money to rich people. They have been discussing their own rebate proposal, one that would give $200 rebates to every taxpayer and their children with taxable income less than $125,000 for single filers and $250,000 for joint filers. That means a family of five would get $1,000 while a single parent with two children would get $600.
“The Senate is focused on ensuring that state money is targeted to those who actually need relief and we look forward to working with Gov. Newsom, Speaker Rendon and our Legislative colleagues to quickly develop a proposal that delivers for struggling Californians,” said state Senate President Pro Tempore Toni Atkins, a Democrat from San Diego.
A spokesperson for Democratic Assembly Speaker Anthony Rendon called Newsom’s idea “consistent with the Speaker’s goal of providing targeted financial relief to Californians most in need” but stressed the idea is “in the very early stages.”
Newsom’s plan is similar to a separate proposal floated last week by more moderate Democrats in the state Assembly that would give every taxpayer $400, regardless of income. Assemblywoman Cottie Petrie-Norris, a Democrat from Laguna Beach who supports that plan, on Wednesday urged the Legislature and Newsom to act quickly.
“The contours of the governor’s proposal are a little different than what we proposed, but I would be very happy to support this,” she said.
The governor’s office said Newsom would be willing to negotiate with lawmakers about who can get the money, a process that could take some time to sort out.
Republicans favor a temporary suspension of the state’s gas tax, saying it’s the quickest way to offer relief. Rebates like the ones Newsom is proposing take time to deliver, with the governor’s office saying people could see the money by July.
“People need relief now,” said Assembly Republican Leader James Gallagher. “We’ve got now, like, four different competing plans amongst the Democrats. These guys are going to negotiate against themselves for weeks to months and who knows what we’re going to get.”
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Associated Press writer Kathleen Ronayne contributed to this report.
