Governor Newsom Proposes Expansion Of Health Care And Tax Cuts

As California’s revenues are at an all-time high, Governor Gavin Newsom proposed a budget that would cut taxes while also promising to pay the health care expenses of all the state’s low-income adults who are living in the country illegally. California taxpayers already pay the health care costs for low-income immigrants 26 and younger and plans to cover people 50 and older this May are in development. Newsom’s proposal would cover everyone else starting in January 2024. Immigrant health advocates have been pushing for this since the federal Affordable Care Act took effect in 2014. Newsom’s plan, if it becomes law, would cover nearly 700,000 additional people.

It is predicted that Newsom’s budget will cost state taxpayers $2.2 billion per year to cover the cost of health care for the state’s low-income immigrants. Newsom’s tax cuts would also reduce revenue by more than $6.5 billion. Fortunately, the numbers still balance since California has a projected $45.7 billion surplus, driven by the incredible growth in tax collections from the top 1% during the pandemic. Although California has the highest unemployment rate in the country, it is on pace to collect at least $25 billion in capital gains taxes for 2021. 

The biggest tax cut would be for businesses. In 2020 California temporarily raised taxes on businesses to help offset what they thought would be a huge deficit. Instead, California posted record surpluses. That tax increase was scheduled to expire at the end of this year. Newsom wants to end it one year early, which would cost the state about $5.5 billion in revenue. The tax cut that will get the most attention is at the pump. California taxes gasoline at 51.1 cents per gallon. That tax is scheduled to increase on July 1 because of inflation. Newsom aims to halt that increase, at least for this year. Doing so would cost the state about $523 million in revenue for civil development such as 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 in addition to the federal stimulus package. This year, Newsom wants to give $1,000 to every low-income family that has a child aged 5 or younger. The state did this last year, but families with no income were not eligible. This year, Newsom wants to also extend that money to families with no income. That would cost roughly $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 an additional $20 million.

Newsom cautioned that the spending limit calculations are complex, saying the figure will change substantially by May when he updates his plan before lawmakers vote on it. Newsom’s proposal now heads to the state Legislature. Several law-making leaders issued statements on Monday praising Newsom’s plan but pledging to work with him over the next month on changes.

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