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Sunday, December 4, 2022

Biggest Month Yet For Stimulus Check For Inflation: California Cash Back Finally Happening

More than three months after Governor Gavin Newsom signed the $308 billion state budget that included the direct tax refunds and stimulus checks to Californians, the payments will finally start reaching households a week from now. The direct tax refund to 23 M residents will help address the pressing issues of rising costs, build reserves, and will be an investment in the future of the Golden State.

The global inflation and the supply issues have majorly combined to create an economic emergency that was an expected consequence of the pandemic that devastated the world and took the lives of over 1.1 M in the US alone.

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 But the federal government erred in the intensity of the inflation that crossed 4 decade-record figures to reach 9.1% in June 2022. The figures have stayed constantly above the 8.5% mark throughout 2022 and there appears little chance of respite in the immediate future.

As inflation raged and state coffers are flush with funds, lawmakers and governors across the US have moved forward with a relatively simple solution to help ease the pain that people across the country, especially in the low and moderate-income category, are feeling at grocery stores and gas pumps. They are giving more money.

This solution has been vehemently opposed by a section of economists who warn that such a move could further fuel inflation. Gasoline prices in California continue to remain the highest in the country. Prices have almost doubled in the last two years to reach $6.38 per gallon in the last week of September.

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Governor Gavin Newsom took the matter into his hands to help residents face up to the double whammy of pandemic-induced economic downturn followed by the record increase in the price of everything from groceries to gasoline.

California Stimulus Check Starting October 7

Starting on October 7th, over 23 million Californians with an income of $250,000 or less a year will receive a stimulus check that ranges from $200 to $1,050 depending on their family status, income, and the presence of dependents. The total expenses are in the range of $10 B.

Stimulus Check
Stimulus Check

The residents of the state will benefit from the extra dollars in hand. It is the most expansive program being sent out by any other state and at least 16 states have already taken measures to provide residents some semblance of relief.

The initial two rounds of payments by the California government had a net positive impact on the residents of the state. Other states too joined them and others like New Mexico have also given put multiple rounds of relief. This southern state bordering Mexico has given out two rounds of stimulus payments in multiple checks over 4 months and has set aside another $10 M for the low-income residents of the states.

California is sending the lowest amount of $350 to individual filers and $700 to joint filers with an adjusted gross income for 2020 of less than $75,000 and $150,000 respectively. An extra $350 will be given if they declare any dependent.

For individual income between $75,001 and $125,000 and joint income between $150,001 and $250,000, it is $250 each, with the same amount allowed for one dependent.

For individual income between $125,001 and $250,000 and joint income between $250,000 and $500,000, the individual checks are $200. So the maximum for the three stages is $1,050, $750, and $600 for each increase in the earning tier.

It is not surprising that many states have come forward to help their residents even as federal support has been stopped, at least for now. More states are veering towards sending money directly to residents as consumer inflation has consistently stayed above the 8.5% mark the whole year, the sharpest spike since November 1981.

The California stimulus check is being given based on income, the presence of dependents, and the filing status. But there is a key difference between California and most other states. While California has a healthy budget surplus of over $97 billion, other states are relying on federal stimulus to support their residents.

The Other States To Move In With Stimulus Checks Funded By Federal Funds

California has one of the strongest economies and if it were to be considered a separate country, it would rank as the fifth largest economy in the world, just behind Germany, and ahead of India.

But other economies have to rely on federal funds given by the Biden administration. The American Rescue Plan Act signed by President Biden in March 2021 made handsome provisions for the state, local, and tribal governments to meet expenses related to the economic downturn triggered by the pandemic.

Stimulus Check
Stimulus Check

Over a dozen states have proposed or have already moved ahead with legislative measures to give stimulus checks of several hundred dollars directly to taxpayers. They include Kansas, Minnesota, Georgia, Hawaii, Idaho, Maine, and Indiana. New Mexico, New Jersey, Virginia, and New York.

Critics, including the opposition Republicans, have chaffed at the largesse. They have said that the payments won’t go far enough given the rate of inflation and will instead only aggravate the situation. They have pushed instead for permanent tax cuts.

But the states are pushing on nonetheless. Maine is giving out one of the most generous stimulus check support with an $850 relief payment to residents given out of the state budget. Governor Janet Mills has said that the stimulus check will help Maine people tackle the increased expenses by putting money directly into the hands of residents. Joint holders will get a stimulus check of $1,700.

Such payments are possible as states have sufficient money on their hand because of soaring tax revenues and federal grants. It is also no coincidence that the payments have been decided to keep in mind the midterms in November 2022. Maine’s gubernatorial election is one of the most closely watched races in years.

Economists say that more than policy, it is the elections that are prompting states to send out more money. They argue that there is nothing more popular than giving free money to voters in an election year. Inflation has led to a spike in the normal family’s food expenses by close to $590 in 2021.

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