News and Commentary

No, California’s Budget Surplus Isn’t Due To Progressive Tax Policies

It has nothing to do with a "significant windfall of tax revenues"

   DailyWire.com
Justin Sullivan/Getty Images

California Governor Gavin Newsom announced on Monday that the Golden State has $75.5 billion in excess funds, something he believes is due to a “significant windfall of tax revenues.” According to The Daily Wire, Newsom plans to provide Californians with a tax rebate.

Of that money, $5.2 billion will be used to cover back-rent and rent for months in the future. Another $2 billion will be used to pay overdue water and electric bills, the governor said in a tweet.

Some Californians will also qualify for another round of the “Golden State Stimulus,” as The Daily Wire reported:

Newsom’s California Comeback Plan still requires approval from the Legislature. It would provide a second round of direct $600 stimulus checks to low-income and middle-class households that make up to $75,000 a year, including undocumented families. He estimates two-thirds of Californians would benefit from the payments. Qualified households with dependents would be eligible for an additional $500, along with an extra $500 in direct payments to undocumented families.

Illegal aliens are also eligible for $1,000 family checks since they were ineligible for the multiple rounds of federal stimulus checks.

According to The Los Angeles Times, the reason Newsom’s administration is cutting the checks is because of a “state constitutional amendment that requires tax rebates when revenues exceed a cap on government spending.”

But the state has excess funds, predominantly because of the various federal stimulus bills that were passed. After the CARES Act passed in March of 2020, California received $15.3 billion in stimulus funds.

In December 2020, California received $50 billion in federal stimulus funds, Cal Matters reported.

When the latest stimulus bill was passed in March 2021, California received an additional $26 billion in federal funds, the state’s Legislative Analyst’s Office (LAO) said in a March report. But the extra cash was unnecessary.

“The pot of stimulus money going to the state government, $26 billion, was so large that officials here were put on the defensive after they revised the state’s budget projection at the beginning of the year. They had been expecting a daunting $54 billion deficit last year. Instead, state officials in January projected a $15 billion surplus,” The New York Times reported.

Newsom can claim this additional funding suddenly happened solely because of a wealth tax, despite a record number of people fleeing the Golden State.

There are a couple of major points that resulted in the surplus:

1. Former Governor Jerry Brown cut taxes and issued budget cuts, which resulted in the state’s first budget surplus in more than a decade, CNBC reported in 2018. The surplus sat at $9 billion after Brown signed his last budget that year. That surplus continued into 2019 with $21 billion in the bank, at which point Newsom upped taxes to the tune of $2 billion. The state’s surplus would have likely continued, assuming Brown’s budget cuts and Newsom’s taxes remained intact.

2. The virus caused the state to dip back into the red. The federal stimulus packages over the last 14 months not only replenished what the state lost due to COVID — it meant the Golden State effectively came out with a bailout.

Over the course of the stimulus packages, California received $91.3 billion in funds from the federal government.  If the state came out with a budget surplus close to what they had in 2019, which was $21 billion, the “surplus” that California currently enjoys isn’t really a surplus at all. It’s a pool of taxpayer funds from Americans across the country.

The notion that Newsom is somehow returning money back to Californians  — money they paid through taxes — is absolutely false. It’s setting Californians up for failure down the road, especially once the pandemic is officially over

When the COVID pandemic is over, the wads of cash stemming from the federal government will come to a halt as well. That spells disaster, not just for Californians, but also for whoever the next governor is. He or she will have to right Newsom’s wrong and admit the surplus was a result of Americans’ collective federal taxes, not the Golden State’s progressive taxes. It means Californians will have to find a new way to fund their progressive agenda. The buck stops with Middle America.

Beth Baumann is a Political Reporter and Editor at The Daily Wire. Follow her on Twitter @eb454.

The views expressed in this piece are the author’s own and do not necessarily represent those of The Daily Wire.

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