Experts Warn Newsom's Gas Refund Package Could Exacerbate Inflation

March 28, 2022 Topic: Gas Prices Region: United States Blog Brand: Politics Tags: Gavin NewsomGas TaxTax RefundCaliforniaGasBuddy

Experts Warn Newsom's Gas Refund Package Could Exacerbate Inflation

Officials should resist the temptation to issue refunds and allow the price of gas to go down naturally, one expert said.

Many Californians rejoiced when they heard that Gov. Gavin Newsom proposed a new plan to help ease the burden of higher gasoline prices on state drivers.

The governor’s $11 billion relief package included a $400 tax refund in the form of a debit card to all Californians for each vehicle they own, capped at two vehicles. The proposal also didn’t have an income cap.

“That direct relief will address the issue that we all are struggling to address, and that’s the issue of gas prices,” Newsom said in a Twitter video. “Not only here in our state, but of course, all across this country.”

Will It Backfire?

However, according to Fox Business, some experts contend that Newsom’s plan could backfire and exacerbate inflation. Patrick De Haan, the head of petroleum analysis at GasBuddy, seemed to take issue with Newsom’s proposal.

“Newsom wants to swell California gasoline demand at a time of refinery challenges and high prices. This will end badly,” he warned on Twitter. “Politicians must resist the urge to get in the middle of markets and let it run its course.”

In a separate tweet, De Haan added: “I, along with most other Americans, hate the high price of gasoline, but giving out gas cards and tax holidays is akin to handing a bottle of Jack Daniels to someone that's already drunk. It enables high prices and high demand.”

He added that, “If inflation isn't high enough already, throw gas cards at everyone and watch what happens.”

Other States Taking Action

Despite that, more states are following in California’s footsteps.

Georgia Gov. Brian Kemp earlier this week signed into law a state income tax refund that will see the state’s households get payments of between $250 and $500. Meanwhile, in Minnesota, Gov. Tim Walz is pushing lawmakers to pass bigger rebate checks of $500 for single tax filers and $1,000 for couples.

Not to be outdone, Georgia and Maryland became the first states to suspend their gas taxes. Lawmakers in Illinois, Massachusetts, Maine, Michigan, New York, Tennessee, and Virginia are considering similar proposals.

There are also proposals being pitched on the federal level. According to a new bill called the Gas Rebate Act, Representatives  Mike Thompson (D-Calif.), John Larson (D-Conn.), and Lauren Underwood (D-Ill.) are aiming to provide an energy rebate of $100 per person every time gas prices rise above $4 per gallon in any month for the rest of the year. Individuals also would receive $100 for each dependent.

“Americans are feeling the impact at the pump of Vladimir Putin’s illegal invasion of Ukraine, and right now we must work together on commonsense policy solutions to ease the financial burden that my constituents are feeling,” Thompson said in a statement.

Ethen Kim Lieser is a Washington state-based Science and Tech Editor who has held posts at Google, The Korea Herald, Lincoln Journal Star, AsianWeek, and Arirang TV. Follow or contact him on LinkedIn.

Image: Reuters.