California inflation relief refunds go out to taxpayers

Get that up to $1,050 California direct tax refund today? Fret not, the first direct payments for about 23 million Californians are going in the direct deposit account Friday, state officials said.

Part of the $308 billion state budget signed by Gov. Gavin Newsom on June 30, one-time payments known as the Middle Class Tax Refund (MCTR) will be sent to taxpayers starting Friday, Oct.7 through Jan. 15, 2023.

“California’s budget addresses the state’s most pressing needs and prioritizes getting dollars back into the pockets of millions of Californians who are grappling with global inflation and rising prices of everything from gas to groceries,” Said Newsom, Senate President Pro Tempore Toni Atkins and Assembly Speaker Anthony Rendon in a joint statement.

Tax refunds are based on 2020 filing status and income. Those making over $500,000 are excluded. Single filers get a base $350, if they make up to $75,000; $250 if they make between $75,001 and $125,000, $200 if they make between $125,001 and $250,000. Married couples with children would get $1,050.

Direct deposits will be issued first, starting Oct. 7 through Oct. 25, according to the Franchise Tax Board. The second round of direct deposits should hit accounts between Oct. 28 and Nov. 14.

Debit cards will be mailed between Oct. 25 through Jan. 15. The Franchise Tax Board will release a detailed debit card payment schedule early next month. “About 90 percent of the (Middle Class Tax Refund) direct deposits will be issued in October,” Franchise Tax Board Spokesman Andrew LePage said in an email to The Sacramento Bee.

The rebates are made possible by California’s $97.5 billion budget surplus, which swelled with income taxes from high earners during the coronavirus pandemic.

This is the second consecutive year Californians will pocket extra money from the state. Last year, residents earning less than $75,000 received up to $1,100.

The inflation relief payments were included in a record state budget that also included a suspension of the state sales tax on diesel, additional funds to help people pay their rent and utility bills, expanded abortion access, universal health care and extended health care to more undocumented immigrants.

“In the face of growing economic uncertainty, this budget invests in California’s values while further filling the state’s budget reserves and building in triggers for future state spending to ensure budget stability for years to come, Newsom, Atkins and Rendon said.

The record spending budget that runs through July 1, 2023 was the subject of weeks of intense negotiations. A balanced budget had to be passed and signed by June 30 to meet a constitutional deadline. Otherwise, state lawmaker salaries would have been suspended.

Budget bill took some time

Democratic California gubernatorial candidate Lt. Gov. Gavin Newsom speaks during his primary election night gathering on June 5, 2018 in San Francisco, California/The Conversation

Newsom grappled with Democratic leadership in the heavily Democratic state Senate and assembly on a variety of issues including whether to tie the tax relief to car ownership; the details of a major climate package; funding increases for universities, housing and social safety net programs; and a plan that would give state regulators more control in approving clean energy projects.

The budget bill approved by the Legislature included about $236 billion in general fund expenditures, with the remainder coming from special funds. It would grow state budget reserves to nearly $38 billion, increase compensation rates for state-subsidized child care providers and expand eligibility for Medi-Cal, the state’s health insurance program for the poor, to all adults, regardless of immigration status, by the start of 2024.

The Legislature overwhelmingly passed the measure, by a party-line vote of 57–16 in the Assembly and 28-8 in the Senate. Republicans complained that not enough of the surplus was directed toward struggling Californians and budget reserve accounts, especially with a potential economic recession looming.

With tax revenues surging, driven by massive income gains among the wealthiest Californians, state leaders maneuvered to avoid the Gann Limit, an obscure provision that prohibits spending above a certain level per capita. Increased infrastructure and emergency expenditures, which are exempt in certain circumstances, as well as the tax refunds, will keep the state below the limit for the next few years. The Legislature is now considering placing a measure before voters on the 2024 ballot that would loosen the Gann Limit restrictions.

The tax rebate program, which has been publicly debated for months, is the centerpiece of the budget deal. Under the $9.5 billion plan, more than 95% of taxpayers — those making as much as $250,000 a year, or $500,000 if they file jointly — will receive a payment this fall.

To reach Californians who do not file taxes, the state will also increase Supplemental Social Security grants by about $39 per month for individuals and $100 for couples, while welfare grants through CalWORKs will increase by an additional 10 percent for the next two years. But many retirees who receive Social Security from the federal government and do not file taxes will still be left out of the program, because officials said the state does not have a way to account for them.

For detailed information on eligibility, payment schedules, and payment information visit the California Franchise Tax Board website https://www.ftb.ca.gov or call (800) 542-9332.