(Bloomberg Law) — Families in California would receive as much as $1,050 to offset rising gas prices and inflation under a preliminary agreement between Gov. Gavin Newsom and Democrats in the Legislature.
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While a deal on the roughly $9 billion cash aid package isn’t final, lawmakers agree on a handful of other tax policy changes as part of an approximately $235 billion state budget package. Those items include a diesel fuel sales tax exemption and the exclusion of waived 2021 Paycheck Protection Program loans from state income tax.
Lawmakers and the Democratic governor have a July 1 deadline to finalize the money aid plan details and enact the bulk of the state budget package in time for the new fiscal year. Votes in the Senate and on the parliament floor on the box will likely occur on Wednesday or Thursday.
Newsom spokesman Anthony York said no formal agreement had been reached. In a written statement, Senate President Pro Tempore Toni Atkins (D) said on Saturday that a preliminary agreement might unravel until all items under negotiation are final.
Under the preliminary money reduction proposal obtained by Bloomberg Tax, individuals earning as much as $75,000 per year, or joint filers earning up to $150,000, would each receive $350 plus $350 for a dependent for a maximum of $ 1.050.
Those with incomes up to $125,000, or filing $250,000 jointly, would receive $250 plus another $250 for a dependent for a maximum of $750. Those earning more than $250,000 or filing $500,000 jointly would get $200 plus $200 for a dependent for a maximum of $600.
The framework is similar to Democratic leaders’ demands to target aid based on income, abandoning Newsom’s bid to send $400 to every car owner, capped at $800 regardless of income.
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Payments would go to approximately 17.4 million tax applicants, 97.5% of all applicants. About 500,000 Californians with incomes over $250,000, or $500,000 filing jointly, would not receive payment.
In addition to direct cash relief, legislators and the governor agree on multiple tax changes included in accompanying bills (AB/SB 194, AB/SB 201) that will accompany the primary financing measure. The bills would:
Exempt diesel fuel from the state tax of 3.9375% for a year beginning Oct. 1 and use public funds to make up for $327 million in lost revenue for transportation projects;
Extend the California Competes Tax Credit Program, which grants income tax credits to businesses expanding or relocating in the state through 2027-28. It pays greater attention to giving tax credits to firms relocating from states with restrictive abortion and LGBTQ+ rights laws.
Exclude waived Paycheck Protection Program loans issued under the PPP Extension Act of 2021 from state income tax;
Allow the Franchise Tax Board to reduce penalties for income tax filers who fail to file or pay on time when they are first-time offenders;
Increase eligibility for the Main Street tax credit, which provides an incentive for small businesses to hire people to help recover from the pandemic, so they don’t have to claim the credit on an original return; and
Increase eligibility for the income and early childhood tax credit, and create a new credit for former foster children of up to $1,176.
Agreements have yet to be negotiated on changes to the state tax on cannabis, a tax credit for union dues, a return to the federal schedule for making estimated income tax payments in 2024, and funding to increase the unemployment insurance tax for employers coming in January. To ease.
To contact the reporter about this story: Laura Mahoney in Sacramento, California, at [email protected]
To contact the editors responsible for this story: Jeff Harrington at jharrington@bloombergindustry.com; Kathy Larsen at [email protected]
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