SACRAMENTO (AP) – With state revenues at an all-time high, Governor Gavin Newsom proposed on Monday a budget that would lower taxes while pledging to pay the health care costs of all low-income adults living in the state. the country illegally.
It will cost state taxpayers about $2.2 billion a year to cover health care costs for the state’s low-income immigrants. Meanwhile, Newsom’s tax cuts would cut revenue by more than $6.5 billion.
But the numbers are still balanced as California has a $45.7 billion surplus, driven by incredible growth in tax collections during the pandemic. California taxes the wealthy more than lower-income earners, so in 2019 the top 1% of earners paid nearly 45% of all state income taxes.
That top 1% has only gotten richer during the pandemic. Although California has the highest unemployment rate in the country, it is on track to collect at least $25 billion in capital gains taxes by 2021, the highest ever. A “capital gain” is the income that comes from the sale of an asset, such as a stock, and is how most wealthy people make their money.
“We have the capacity to invest in our growth engines, invest in the future and ensure we prepare for the uncertainties that the future will bring.” Newsom praised his plan to put $34.6 billion in reserves.
California taxpayers are already paying health care costs for low-income immigrants aged 26 and under and plan to pay for those aged 50 and older in May. Newsom’s proposal would cover all others from January 2024.
Immigrant health advocates have been pushing for this since the federal Affordable Care Act went into effect in 2014. That drastically reduced the number of people in California without health insurance.
“The big gap was those who were left out because of immigration status,” said Sarah Dar, director of health and public benefits for the California Immigrant Policy Center.
Newsom’s plan, if passed into law, would cover nearly 700,000 additional people. The Secretary of State for Health and Human Services, Mark Ghaly, said the state is already supporting these people through charity, relief and other forms of free care, and officials believe that insuring these populations will reduce these costs over time. .
The biggest tax cut would be for businesses. At the start of the pandemic in 2020, California temporarily raised taxes on businesses to help offset what they thought would be a massive deficit. Instead, California posted record surpluses. The tax hike is expected to expire at the end of this year. Newsom wants to close it a year early, which would cost the state about $5.5 billion in revenue.
But the tax cut that will get the most attention is at the pump, where Californians pay the highest gas prices in the country. California taxes gasoline at 51.1 cents per gallon. That tax is scheduled to go up on July 1 due to inflation.
Newsom wants to put a stop to that increase, at least for this year. This would cost the state about $523 million in revenue for things like roads and bridges. But Newsom says the state can cover that loss with its surplus.
Last year, California spent billions of dollars on stimulus checks, with most people getting about $1,000 on top of the federal stimulus package. This year, Newsom wants to give $1,000 to every low-income family with a child 5 years old or younger.
The state did this last year, but families with no income were not eligible. This year, Newsom also wants to give that money to families without income. That would cost about $55 million a year. He also wants to give $1,000 to people who have come through the state’s foster care system but are still 25 or younger. That would cost about $20 million.
But it’s possible that California will again be handing out incentive checks to residents this year. Newsom said revenues are growing so fast that the state is expected to exceed a constitutional spending limit by about $2.6 billion. If that happens, the state can return some of that money to taxpayers.
Newsom warned that the spending limit calculations are complex and says the figure will change significantly in May if he updates his proposal before lawmakers vote on it.
“Substantial contributions are likely to be returned to taxpayers,” Newsom said. “Whatever form they come in, we will work with the legislature.”
Newsom’s proposal now goes to the state legislature, where Democrats have such a large majority that they can approve any spending plan without a Republican vote. Several Democratic leaders issued statements on Monday praising Newsom’s plan but vowing to work with him on changes over the coming month.
For example, Newsom is asking the legislature to pass a law that would give workers more paid time off if they become ill with the coronavirus. California had such a law last year, but it expired in September.
Last year, companies were able to receive compensation from the federal government for the money they paid to employees who took time off because of the corona virus. But the federal government doesn’t do that anymore. Assembly chairman Anthony Rendon, a Los Angeles Democrat, said that if California requires companies to give employees more paid leave, the state should help them pay for it.
“I support increasing the governor’s budget to add state funding for this, and we’ve already had a productive discussion about this,” Rendon said.
Senate Republican leader Scott Wilk praised Newsom for proposals such as stopping the gas tax hike, increasing law enforcement spending to investigate and prevent shoplifting, and lowering taxes on businesses. But in general, Republicans criticized Newsom for throwing money at the state’s problems.
“The mindset that success is determined by how much is spent rather than by real, measurable, and factual results is mind-boggling,” said Vince Fong, Republican vice chair of the Assembly’s Budgets Committee. “Californians live in a different reality and see problems only getting worse.”
© Copyright 2022 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.