California Gov. Gavin Newsom has a plan to mitigate soaring gas prices where residents pay more per gallon than any other state in the nation: a giveaway to the rich.
On Wednesday, the governor’s office unveiled a plan to give $400 per registered vehicle to each Californian, regardless of income, with an $800 cap per individual but not household.
“We’re taking immediate action to get money directly into the pockets of Californians who are facing higher gas prices as a direct result of Putin’s invasion of Ukraine,” Newsom said in a press release in a regurgitation of White House talking points to blame record prices at the pump on Russian aggression.
The $9 billion in direct payments are slated to benefit California’s high-income earners with multiple cars. Even owners of electric vehicles would collect payments.
Californians who don’t own vehicles would be excluded from the checks. Only $2 billion in the proposal is set aside for three months of free public transportation courtesy of taxpayers, complemented by a partial sales tax holiday on diesel and suspension of inflationary adjustments to excise taxes on fuel.
“This package is also focused on protecting people from volatile gas prices, and advancing clean transportation,” Newsom added. The proposal also promotes electric cars by allegedly fast-tracking projects on electric vehicle infrastructure.
Earlier this month, gas prices reached new heights with a national average of $4.33 per gallon, according to AAA travel agency’s gas tracker. The national average as of Thursday stood at $4.33, still more than 20 cents above the prior record set in 2008 when prices reached $4.11. California residents are coping with the highest prices of any state, at an average of $5.88 per gallon. Some areas have seen prices eclipse $6.
Those without vehicles are still affected by the rapidly rising cost of gas, which presents inflationary ripple effects throughout the economy with higher prices to manufacture and transport basic goods.
While Newsom plans to give gas cards to the state’s wealthy, Democrats in the state legislature have constructed an alternative proposal to dole out targeted relief to those most affected by rising energy prices. Democrat Assembly Speaker Anthony Rendon and Senate President Pro Temp Toni Atkins want to send $200 cash payments to every California taxpayer and dependent, with eligibility for checks capped at household incomes of $250,000.
“I appreciate Gov. Newsom’s work on developing another option to bring relief to Californians experiencing the rising cost of fuel and consumer goods,” Atkins told the Los Angeles Times. “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.”
While offering short-term relief, neither plan addresses the underlying issue of high gas prices created as a direct consequence of Democrats’ suppression of domestic energy production, starting with the White House. Instead, like with schooling, state subsidies are likely to spike prices in the long run. The phenomenon is known as the “Paradox of Subsidies.”
States are constrained from increasing American energy production with limited options in comparison to the federal government, which reserves jurisdiction over about a third of the nation’s lands. Gas prices began their immediate ascension upon President Biden’s day-one orders to cancel domestic energy projects and suspend new oil and gas leases on federal lands, killing opportunities and incentives for producers to sustain operations in the wake of rising demand. The Biden administration has sent mixed signals to the oil and gas industry with demands to ramp up exports of liquified natural gas (LNG) while refusing to endorse more investment.
One policy lever pulled by governors is to suspend gas taxes using state surpluses from excessive Covid relief to absorb the revenue shortfall. Governors in Connecticut, Maryland, and Georgia have already signed gas tax holidays for this spring, while lawmakers in Michigan, and Florida are considering similar measures.
Billions in leftover Covid stimulus could be reallocated to states that also wish to suspend the tax but require the funds to do so.