Newsom gas tax relief plan: $400 debit cards and no tax hike

Gov. Gavin Newsom wants to counter spiking gas prices by sending $400-per-vehicle payments to drivers and freezing a gas tax increase tied to inflation.

The governor’s two-part proposal represents the latest development in negotiations with the Legislature over how to offset soaring fuel costs. It differs markedly from legislative leaders' framework.

The proposal: Newsom wants to offer $400 debit cards that are tied to vehicle ownership, capped at two vehicles per household. There would be no income eligibility threshold. He is pressing ahead with a plan to halt a scheduled July 1 hike in the state’s gas tax tied to inflation. And the governor is seeking $750 million to fund three months of free public transit for commuters.

The debit cards would go to drivers regardless of whether they own a gas- or electric-powered vehicle, according to the governor's office.

The total cost would be roughly $11 billion — a commitment made possible by a booming budget surplus.

The implications: Newsom’s proposal breaks with the approach favored by Assembly Speaker Anthony Rendon and Senate President Pro Tem Toni Atkins, highlighting the sticking points in budget talks.

The Democratic leaders have agreed California just address gas prices but differed with Newsom on the details. Their plan would only extend to California households earning less than $250,000 per year in an effort to target Californians most in need. It would be tied to individuals, not cars.

Atkins and Rendon have also rejected Newsom’s earlier call for a gas tax “holiday" on the inflation-tied increase, arguing it would not offer clear benefits to consumers. The gas tax increase stems from a hard-fought 2017 deal, with proceeds funding transportation projects, that many legislative Democrats are loathe to dilute. They have both broken with Newsom and rebuffed Republican efforts to suspend gas taxes.

What’s next: This looks to be one of the most contentious pieces of ongoing budget talks. Newsom and leaders will continue hammering out the details in the months ahead.