U.S. States Seek To Ease Inflation Burden With Stimulus Payments

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U.S. States Seek To Ease Inflation Burden With Stimulus Payments
With gas, groceries and many other necessities costing consumers more, some states are considering using leftover federal funds to help.

With inflation raging and state coffers flush with cash, governors and lawmakers across the U.S. are considering a relatively simple solution to help ease the pain people are feeling at the gas pump and grocery store — sending money.

At least a dozen states have proposed giving rebate checks of several hundred dollars directly to taxpayers, among them California, Kansas and Minnesota. Critics, including many Republican lawmakers, say those checks won't go far enough given the pace of inflation and are pushing instead for permanent tax cuts. 

A proposal from Maine Gov. 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's budget bill.

In addition to the direct rebates, lawmakers and governors across the country are considering cuts to sales taxes, property tax relief and reducing or suspending state gas taxes.

The proposals come at a time when many states actually have too much money on their hands because of billions of dollars in federal pandemic aid and ballooning tax revenue. It’s also happening as the war in Ukraine has compounded soaring prices for fuel and other essentials.

The states are moving toward sending people money as consumer inflation has jumped nearly 8% over the past year. That was the sharpest spike since 1982.

Inflation boosted the 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 buy the same amount of goods and services as they purchased in previous years.

The relief plans vary by state. Minnesota Gov. Tim Walz, a Democrat, released a plan for spending the state's budget surplus that included a proposal for income tax rebate checks of $1,000 per couple. In California, Democratic lawmakers have released separate proposals to send rebates of $200 to $400 to each taxpayer, while Gov. Gavin Newsom said he wants to distribute fuel debit cards of up to $800 to help ease the burden on residents paying the highest gas prices in the nation.

Democratic governors in other states have proposed other approaches. Pennsylvania Gov. Tom Wolf is seeking a one-time property tax subsidy for lower-income homeowners and renters. In Illinois, Gov. J.B. Pritzker has proposed halting a 2.2-cent increase in the motor fuel tax, suspending a 1% grocery sales tax for a year and providing a property tax rebate of up to $300.

New Jersey got out front early. Gov. Phil Murphy and the Democrat-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 up for election.

Proposals for relief haven't gone so smoothly in other states. Vermont Gov. Phil Scott, a Republican, has proposed returning half of a $90 million surplus in the state Education Fund to the state’s property taxpayers with a check of between $250 and $275, but the Democrat-controlled Legislature has shown little interest.

Additional reporting by The Associated Press.