Inflation Relief: California and other states are sending checks, but some experts say they could be helping prices rise

Several states are sending taxpayers money to help them deal with inflation, but some economists warn the payments will do little to ease the pain of rising costs and could fuel inflation further.

In California, for example, about 23 million eligible taxpayers are expected to receive it up to $1,500, with smaller payments going to higher earners. The payments, which are technically tax refunds, begin Oct. 7 and are intended “to help manage rising costs,” according to Democratic Governor Gavin Newsom’s office.

In Georgia, taxpayers received up to $500 in one-time tax refunds over the summer.

“As hard-working Georgians face rising inflation caused by failed federal government policies, we’re doing what we can to remedy the situation by putting their money back in their pockets,” Republican Gov. Brian said Kemp in a May statement.

In other places, like Colorado, are states required by law to return excess government revenue to taxpayers. tax refunds that came out this summer are worth $750 for individual taxpayers and $1,500 for joint taxpayers. Democratic Gov. Jared Polis, dubbed the “cash back” program, said the state pushed up refunds by about a year “because they need them now,” according to one interview with Colorado Public Radio in August.

For families struggling to pay for gas and other everyday expenses, some extra cash could offer short-term relief. However, economists argue that investing more money in the economy can push up demand and prices for everyone.

“Spending dollars in an inflationary environment will only make matters worse by driving prices higher,” wrote Beth Akers, senior fellow at the American Enterprise Institute, in a blog entry last week.

On Friday, the US Federal Reserve’s preferred measure of inflation showed prices are still rising, up 6.2% in August from a year ago. The central bank’s job is to keep inflation under control, which it can do by raising interest rates. Unfortunately, higher interest rates can cause Americans economic pain by making it more expensive to borrow money. The Fed raised interest rates by three-quarters of a percentage point earlier this month for the third consecutive month.

Jason Furman, a Harvard professor and a former economics adviser in the Obama administration, has also argued that payments in California, one of the largest programs, could be contributing to rising prices.

“As such, these inflation relief payments will export inflation to the rest of the United States — with some also appearing in California,” Furman tweeted earlier this month.

Still, politicians are eager to sell the payments as a helpful benefit to taxpayers in a mid-election year.

“Unfortunately, the stimulus checks are more of a tool to drive a policy agenda,” said Lucy Dadayan, a senior research fellow at the Urban-Brookings Tax Policy Center, where she leads a project on state tax collections.

“The controls could fuel inflation further,” she added.

In addition, it could set government budgets – many of which are seeing Tax revenue growth slowed — in a precarious situation in the coming year.

“At this rate, we will see government budget deficits this fiscal year,” Dadayan said.

The CNN wire™ & © 2022 Cable News Network, Inc., a Warner Bros. Discovery company. All rights reserved. Inflation Relief: California and other states are sending checks, but some experts say they could be helping prices rise

Laura Coffey

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