Some US states seek to ease the burden of inflation with direct payments

PORTLAND, Maine (AP) — With inflation raging and state coffers filled with cash, U.S. governors and lawmakers are considering a relatively simple solution to help ease the pain people are feeling at the gas pump and at the grocery store – send money.

At least a dozen states have offered to give refund checks worth hundreds of dollars directly to taxpayers, including California, Kansas and Minnesota. Critics, including many Republican lawmakers, say those checks won’t go far enough given the pace of inflation and are instead pushing for permanent tax cuts.

A proposal from Maine Governor Janet Mills is among the most generous in a state where the cost of food and fuel has skyrocketed in recent months. The Democratic governor wants to send $850 to most residents as part of the state budget bill.

The reimbursement “will help Maine residents with these increased costs by putting money directly into their pockets,” Mills said.

But Wendell Cressey, a clam fisherman in Harpswell, said soaring fuel costs for people in his business means the check will only provide temporary relief.

Propelled by soaring gas, food and housing prices, consumer inflation jumped 7.9% over the past year. (CNN, @DTGTACOS, INSTAGRAM)

“It might help a bit, but it would have to be a lot more because we’re paying for the gas. Most of us have V-8 trucks,” Cressey said. “I just don’t think it’s going to help as much as they think it will.”

In addition to direct rebates, lawmakers and governors across the country are considering lowering sales taxes, alleviating property tax, and reducing or suspending state gasoline taxes.

The proposals come at a time when many states actually have too much money on their hands due to billions of dollars in federal pandemic aid and soaring tax revenues. It also comes as the war in Ukraine has aggravated soaring prices for fuel and other essentials.

It’s also no coincidence that the relief is launched during an election year, said Mark Brewer, a political science professor at the University of Maine. Maine’s Governor’s Race is one of many closely watched competitions at the state level this year.

“There’s a real political reason to do this,” Brewer said. “But at the same time, it’s also clear that this is an election year, and in an election year, there are few things as popular as giving voters what voters see as free money from the election. ‘State.”

States are shifting towards sending money to people, with consumer inflation jumping nearly 8% in the past year. This is the biggest increase since 1982.

Inflation pushed up a typical family’s food expenses by nearly $590 last year, according to the Penn Wharton Budget Model, a project of the University of Pennsylvania’s Wharton Business School. Overall, the average family had to spend $3,500 more last year to purchase the same amount of goods and services as in previous years.

In New Mexico, some have questioned whether Democratic Gov. Michelle Lujan Grisham’s plan for a $250 rebate goes far enough given rising consumer prices.

Wayne Holly and his wife, Penny, were among small business owners in the state who were forced to shut down early in the COVID-19 pandemic due to the governor’s public health orders.

Their t-shirt and screen-printing business has weathered this storm narrowly, but is feeling the pinch again as the cost of materials skyrockets and customers seek to save their own bank accounts from depleting.

“Do we have angry and furious customers because things have changed? Yes, of course we do,” said Wayne Holly. “Do we have clients who say ‘I’ve never paid this before?’ I say ‘Yeah, I never paid $4.50 for a gallon of gas.’

New Mexico’s reimbursement plan, and concerns about its usefulness, reflect a growing trend among states as they try to find relief for their residents amid criticism that they could do more.

Many states are awash with record amounts of cash, thanks in part to federal funding for COVID-19 relief. Measures passed by Presidents Donald Trump in 2020 and Joe Biden last year allocated a combined total of more than $500 billion to state and local governments. Some of this money is still in state coffers waiting to be spent.

These federal pandemic relief laws also provided stimulus checks to U.S. taxpayers, which helped spur consumer spending on goods subject to state and local sales taxes. From April 2021 to January 2022, total state tax revenue, adjusted for inflation, increased by more than 19% compared to the same period a year earlier, according to a recent report by the Urban Institute. .

“Overall, the state fiscal position is strong and much better than where we thought states would be at the start of the pandemic,” said Erica MacKellar, fiscal policy analyst at the National Conference of State Legislatures.

This gave state officials greater confidence to consider tax refunds or direct payments to residents. But some financial experts are urging caution, noting that inflation could also push up government spending and wages.

“State legislatures should not be rushing to enact permanent tax cuts based on what could very well be temporary growth in real incomes,” wrote Lucy Dadayan, senior research associate at the Urban Institute. , in a recent analysis.

Back-up plans vary by state. Minnesota Governor Tim Walz, a Democrat, released a plan to spend the state’s budget surplus that included a proposal for $1,000 income tax refund checks per couple. In California, Democratic lawmakers released separate proposals to send rebates of $200 to $400 to each taxpayer, while Governor Gavin Newsom said he wanted to hand out fuel debit cards of up to $800 for help ease the burden on residents paying the highest gas prices in California. the nation.

Democratic governors in other states have offered other approaches. Pennsylvania Governor Tom Wolf is calling for a one-time property tax grant for low-income homeowners and renters. In Illinois, Governor JB Pritzker has proposed suspending a 2.2-cent fuel tax increase, suspending a 1% tax on grocery sales for a year, and providing a rebate of property tax of up to $300.

New Jersey came out early. Governor Phil Murphy and the Democratic-led Legislature included cash checks of up to $500 to about 1 million families as part of a budget deal last year when the governor and lawmakers were in election.

The state’s rosy fiscal picture, fueled by healthy tax revenues and federal funds — as well as higher taxes for people earning $1 million — has continued this year. But Murphy’s fiscal year 2023 budget does not include additional cash rebates.

Relief offers have not gone so smoothly in other states. Vermont Governor Phil Scott, a Republican, has offered to return half of a $90 million surplus from the state’s education fund to state property taxpayers with a check for between $250 and $275 dollars, but the Democratic-controlled legislature showed little interest.

“Usually when you overpay for something, you get some of that money back,” Scott said when he made the proposal earlier this month.

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Associated Press writers Susan Montoya Bryan in Albuquerque, New Mexico; Mike Catalini in Trenton, New Jersey; David A. Lieb in Jefferson City, Missouri; Wilson Ring in Montpelier, Vermont; and business writer Christopher Rugaber in Washington contributed to this report.

Copyright 2022 The Associated Press. All rights reserved.

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