Newsom Promises Tax Refund to Ease Pain at the Pump

Gov. Gavin Newsom wants to use a tax refund to ease the pressure Californians are feeling at the gas pump and double down on his commitment to lead the country’s transition away from fossil fuels, he announced Tuesday evening in his annual State of the State address.

Facing few political headwinds on his path to reelection and bolstered by record tax revenues, Newsom opened the speech by acknowledging the ongoing attack on Ukraine and tying that “geopolitical uncertainty” to the economic pressures squeezing Californians. With the average price of a gallon of gas soaring above $5 in the state, the governor vowed to include a tax refund in the revised state budget proposal he will release in May.

But he also resisted calls to expand local oil production in the face of President Biden’s ban on oil imports from Russia, saying there is a third way forward, a better way he dubbed “the California way.”

“At a time when we’ve been heating up and burning up, one thing we cannot do is repeat the mistakes of the past,” Newsom said, “by embracing polluters, drilling even more, which only leads to even more extreme weather, more extreme drought, more wildfire."

"Think about this — in just ... the past few years we’ve seen whole communities wiped off the map: Greenville, Paradise, Grizzly Flats. How many more are we willing to sacrifice? We need to be fighting polluters, not bolstering them," he added.

Newsom previously had proposed to delay a scheduled increase in the state’s gas tax, a decision buffered by the state’s surging revenues, which have continued to rise as the state bounces back from the pandemic. The governor highlighted those wins, noting the state’s impressive GDP growth and strong job growth over the past year.

A report from the state’s Legislative Analyst’s Office released last month projected that the state will rake in at least $6 billion more than anticipated in Newsom’s January budget proposal.

A healthy budget windfall will allow Newsom and legislative Democrats to pursue record investments, like the $1.5 billion the governor wants to spent on electric vehicle charging stations, rebates for purchasing electric cars and local green initiatives.

“California’s leadership in clean technology … is not just a national security and an environmental justice imperative. Clean energy is this generation's greatest economic opportunity,” Newsom said.

But Newsom offered no details on how the tax refund would be calculated. The state's gas tax, which is $0.51 per gallon of gasoline this fiscal year, is charged to suppliers, not directly to consumers at the pump. And Republicans immediately blasted the proposal as too little, too late.

"A gas tax rebate in July will do exactly nothing for drivers who are currently struggling with the highest gas prices in history, being forced to choose between driving their kids to school or putting food on the table," said Republican Assembly Leader James Gallagher, R-Yuba City, in a statement.

In Tuesday's speech, Newsom also touted his marquee proposal, called Care Court, to help Californians with severe mental illness or addiction, many of whom are experiencing homelessness.

The plan, unveiled last week, would require each county to create a mental health branch of civil court and provide individuals with treatment and supportive services. Participants would be compelled to accept care, or face forced hospitalization or conservatorship.

“Getting people off the streets, out of tents and into housing and treatment is essential to making our streets safe for everyone,” Newsom said.

In a prerecorded "prebuttal" to Newsom’s speech, Assemblymember Suzette Valladares, R-Santa Clarita, urged the governor to declare a state of emergency on homelessness, a move that could remove some regulatory hurdles to building shelters.

She also tied the issue of homelessness to public safety, a clarion call for the state Republican party ahead of this year’s midterm elections.

“The failure of the governor on this issue is clear,” Valladares said. “Not just in growing encampments but in the tidal wave of crime that is washing over our communities.”

Newsom acknowledged the anxiety over crime, which polls show increasing despite low overall crime rates.

But just hours after Democrats in the Legislature voted down a GOP bill that sought to repeal Proposition 47, the controversial 2014 criminal justice reform measure supported by Newsom, the governor argued that the state needs to strike a balanced approach in response to concerns of crime.

“Our approach is to be neither indifferent to the realities of the present day, nor revert to the heavy-handed policies that have marked the failures of the past,” he said, citing recent new investments in law enforcement including the creation of a special unit at the attorney general’s office dedicated to combating retail theft.

Six months after surviving a bitter recall in landslide fashion, Newsom pushed back against what he described as “powerful forces and loud voices — stoking fear and seeking to divide us, weakening the institutions of our democracy.” He tied what’s happening in Ukraine to the divisions in America, and said that California’s green energy future will allow the state to be freed “from the grasp of petro-dictators.”

Newsom also used the relatively short address to highlight the ongoing changes he’s pushed in public education, including expanding transitional kindergarten and before- and after-school programs and making community college free for some.

But in a sign of the political debate ahead this midterm election year, he also used that part of the speech to take a swipe at states like Florida and Texas.

“I’m not talking about that version of education 'reform' being promoted in some states where they’re banning books, where you can sue your history teacher for teaching history and where you can’t say the word 'gay,’” he said. “I’m talking about a real transformation of our public education system, like we’re doing right here in California.”

An earlier version of this story misidentified the tax refund as a "gas tax rebate." We regret this error.