Faced with potentially devastating recall election, California Governor Gavin Newsom (D) appears to be taking a page from French President Emmanuel Macron's book - announcing a new plan on Monday to shower residents in stimulus money thanks to a 'massive tax-collection windfall,' which will help finance a $100 billion state-level economic recovery package - the centerpiece of which would be $11.9 billion in direct cash payments to most Californians.
According to Bloomberg, the plan would expand upon a previous program which delivered $600 checks to qualifying low-income residents by allowing middle-class residents to become eligible. This means 2/3 of Californians would receive a check of at least $600, with families that have children receiving an additional $500 - essentially creating the largest state tax rebate on record, according to Newsom's comments at a Monday press conference in Oakland.
"We believe people are better suited than we are to make determinations for themselves on how best to use these dollars," said Newsom.
The Democratic governor is seizing on an unprecedented $75 billion operating budget surplus, fueled by a surging economy and capital-gains taxes, to greatly expand the state’s role in the recovery just as he is facing a potential recall election later this year. The windfall leaves Newsom and lawmakers with $38 billion extra to spend as they see fit, since some of the money is already earmarked.
The state will get an estimated $27 billion from President Joe Biden’s stimulus plan, according to latest Treasury figures.
Newsom’s plan would also spend $5.2 billion on what he said would be the largest renter assistance package in the country and would allow low-income residents to cover their back-rent and their rent for several months into the future. It also spends $2 billion to cover overdue water and utility bills. -Bloomberg
Billed as the "California Comeback Plan," the program will take advantage of the state's progressive tax system which take in more revenue from the highest earners. Newsom, touting the plan, will spend the next week bragging about how the state collected more than expected from its wealthiest residents, who have benefited from rising stock prices and stable employment in the state.
According to Newsom, families earning less than $75,000 per year will benefit form the tax windfall.
"The state is awash in cash," said CreditSights senior muni analyst John Ceffalio. "California came into the pandemic in good fiscal shape and it’s probably leaving it in even better fiscal shape."