Surprise! Gavin Newsom’s ‘Middle Class Tax Refund’ May Be Taxable

California Gov. Gavin Newsom (D) provided residents with a “Middle Class Tax Refund” right before his reelection last year, ostensibly to fight inflation — but recipients of the checks may have to pay tax to the IRS.

As Breitbart News reported, the so-called “refund” was hatched by Newsom and the Democrats last year:

California will begin sending “inflation relief checks” to residents in October, right before Election Day, as voters are mailing in their ballots, thanks to a plan launched by Gov. Gavin Newsom (D) and agreed to earlier this year by the state’s Democrats.

As Breitbart News reported, Newsom’s plan began as a proposed rebate to help residents afford the high cost of gasoline, which is more expensive in California than in any other state thanks to taxes and regulations (which were not reformed).

Ultimately, the Democrat-dominated state legislature, which had refused to delay a rise in the gas tax, agreed to the “inflation relief checks.” Coincidentally, they will begin arriving as Newsom, who is up for reelection, will face the voters’ verdict.

Some households received checks of up to $1,050 from the state — a transfer that economists pointed out was likely to increase inflation, even while appearing to help, because of increased government spending. Those who received $600 or more were sent a 1099-MISC income tax statement by the state.

Last month, as Breitbart News reported, the State of California urged those who had received their “refund” in the form of bank cars to cash them in as soon as possible, because thieves were targeting the refunds in scams.

Moreover, the “refunds” were not technically tax refunds, which has led some tax preparers to advise clients to declare them as income when they file their federal tax returns. The San Francisco Chronicle recently reported:

Without the IRS’ formal guidance, confusion has set in over how to handle these payments as tax season begins in earnest. Some major tax-preparation companies have been treating it as not taxable, while other tax professionals believe it is.

…

The bill that authorized the payments exempted them from state income tax. Although the bill called them refunds, it also said they “shall not be a refund of an overpayment of income taxes.”

The IRS is expected to issue guidance to taxpayers on how to report their “refunds.” Meanwhile, the 2022 election is a distant memory.

Joel B. Pollak is Senior Editor-at-Large at Breitbart News and the host of Breitbart News Sunday on Sirius XM Patriot on Sunday evenings from 7 p.m. to 10 p.m. ET (4 p.m. to 7 p.m. PT). He is the author of the new biography, Rhoda: ‘Comrade Kadalie, You Are Out of Order’. He is also the author of the recent e-book, Neither Free nor Fair: The 2020 U.S. Presidential Election. He is a winner of the 2018 Robert Novak Journalism Alumni Fellowship. Follow him on Twitter at @joelpollak.