Mar 25, 2022 - Economy & Business

$400 debit cards and grocery tax suspension among governors' efforts to tackle inflation

Illustration of a large dollar bill sign balloon being held by a man who is floating slightly off the ground.
Illustration: Aïda Amer/Axios

With voters grumbling and midterm elections looming, governors and state legislators are scrambling to attack the inflation crisis.

  • At least 22 governors have proposed cutting or suspending gas taxes, seven states are considering measures to alleviate food costs, and about a dozen are maneuvering to reduce income taxes, research firm Strategas told Axios.

Why it matters: Inflation reached a new 40-year high of 7.9% in February and appears headed higher in March as gasoline prices soar, generating agitation among consumers.

  • “Inflation is the quickest way to remove a president or a governor,” Daniel Clifton, head of policy research at Strategas, tells Axios. “The governors see this.”

The big picture: States are flush with cash after reaping a windfall from the federal government in the early going of the pandemic, when federal stimulus dollars were flowing. So they've got some money to spend.

  • “This is the best shape that we’ve seen the operating budgets of state governments in our lifetime,” Clifton says.

The intrigue: The situation is positively discombobulating from a political perspective, as prominent Democrats are among those calling for measures to help their constituents afford gasoline — a fossil fuel that contributes to climate change.

  • Gov. Gavin Newsome is pitching a plan to send $400 debit cards per vehicle owner, capped at two per household regardless of income, in an effort to ease the impact of California’s record of nearly $6-per-gallon at the pump.

Of note: Republicans are also taking the opportunity to push through tax cuts, some temporary, some permanent.

  • Tennessee Gov. Bill Lee on Thursday proposed a 30-day suspension of state and local grocery sales taxes, calling it “the most effective way to provide direct relief to every Tennessean.”

The other side: Consumer advocates note that high-income Americans are largely able to deal with inflation — and say relief efforts should be targeted at low-income folks.

  • “There are some people who are doing OK through all of this. I’m doing OK — I don’t need a tax break on my groceries,” Josh Bivens, director of research at the Economic Policy Institute, tells Axios. “That’s money that can be better directed to people who are suffering.

Our thought bubble: Temporary tax cuts are often hard to roll back. But with inflation outpacing wage gains, many Americans are losing ground.

Go deeper