Posted on 09/14/2022 6:29:08 PM PDT by nickcarraway
The state's $9.5 billion Better for Families program will provide checks of up to $1,050 to state residents to stem the rising costs of living.
California's state government is plowing ahead with its plan of sending free money to people to mitigate the pain of inflation.
On Tuesday, state Sen. Nancy Skinner (D–Berkeley) tweeted a reminder that in October, California residents who filed a tax return in 2020 should start seeing checks appear in their mailboxes courtesy of the Better for Families tax refund program.
The rough sketches of the program were announced in late June as part of the budget deal reached between Gov. Gavin Newsom, a Democrat, and state legislative leaders.
The $9.5 billion program will provide checks of up to $1,050 depending on one's income, filing status, and number of dependents. Single-filers earning more than $250,000 (or joint filers earning more than $500,000) aren't eligible for the checks.
Much like the Inflation Reduction Act passed by the U.S. Congress last month, these tax refunds will likely exacerbate the problem they're trying to mitigate.
The program puts cash in the hands of low- and middle-income consumers with a higher marginal propensity to consume. That's a fancy way of saying they're more likely to spend this money instead of saving or investing it. That's particularly true in an inflationary environment where prices are rising fast.
And boosting statewide demand will boost prices.
There's already evidence of federal checks-for-all have increased inflation. The $1.9 trillion American Rescue Plan, passed in March 2021, which included $1,400 stimulus checks, is estimated by one Federal Reserve Bank of San Francisco analysis to have raised inflation by three percentage points.
It's important to point out that the state is issuing these tax refunds because it sort of has to. A convoluted budget mechanism known as the Gann Limit requires the California state government to return budget surpluses to taxpayers or spend them on a few budget categories like infrastructure and education.
One libertarian argument would be that, given the Gann Limit, it's better to return that money to taxpayers than let state bureaucracies spend it on public works and public programs.
That's a fair enough perspective. It's complicated by the fact that the state is mostly flush with revenue because of higher-than-expected tax returns from high-income earners. Many of those high-income earners either won't qualify for the Better for Families program. The Better for Families program is therefore an income redistribution program. For many recipients, their payout might exceed their state tax burden.
Leaving money to state bureaucracies to spend, which has obvious libertarian drawbacks, would probably be better for inflation. Those bureaucracies would be slower to spend the money and thus less prone to boosting demand.
Better yet, California's politicians could return the state's budget surplus to the high-income earners who funded it. That would be fairer. It would also be less likely to increase inflation because higher income earners have a lower marginal propensity to consume.
That's not what state politicians did. The state's consumers will now reap the consequences.
At least they can’t print money like the feds.
Isn’t giving money to combat inflation, like putting out a fire with gasoline?
Knock off the logic and reality.
This is in California, where where Gruesome and his left elite thugs live and rule in a different world, than we do.
Free money. What will they think of next?
CA got its money from FedGov which created it out of thin air.
They’re not printing the money. They’re just stealing it from the “rich” to give to the poor.
People talk about the inflationary pressure from energy prices, particularly gas and diesel. But they don’t consider the inflationary pressure of higher starting wages that occurred because of covid. If you can flip burgers for $13/hr and higher you suddenly have more to spend that entry level workers usually wouldn’t and those wages have to be paid for somehow. Middle class are experiencing wage compression as their compensation hasn’t kept up vs fresh off the street. They feel the pain of inflation more.
There would have been some inflation under Trump as well coming out of peak covid. I don’t believe it would’ve been as troublesome as under Joe.
Idiocy!
“tax refund program” isn’t money from thin air like the Feds.
Free Taxes?
CA has a budget surplus only because of COVID money from the fedgov. The fedgov printed it and gave it away to the states. There’s no difference if the fedgov gave it directly to the taxpayers or routes it through the states. It is the exact same inflationary root cause — fedgov creating too many dollars out of thin air.
If there are 7 ways to go, and one of them is catastrophically stupid, that will be the path California takes.
Reminds me of Pelousy stating that ‘for every dollar of unemployment paid out, 2-3 dollars are’ created’ in the economy.
The new math.
Like putting out fire with gasoline.
“Isn’t giving money to combat inflation, like putting out a fire with gasoline? “
It doesn’t affect inflation. It only diminishes the effect of inflation on the recipients of the money.
It transfers tax revenue from those with higher income to those with lower income.
Disclaimer: Opinions posted on Free Republic are those of the individual posters and do not necessarily represent the opinion of Free Republic or its management. All materials posted herein are protected by copyright law and the exemption for fair use of copyrighted works.