Treasury Secretary Scott Bessent warns Governor Gavin Newsom that his threat to withhold federal tax payments from California could result in criminal charges for tax evasion amid escalating tensions between the state and federal government.
At a Glance
- Treasury Secretary Scott Bessent accused Governor Newsom of threatening to commit criminal tax evasion
- Newsom suggested withholding federal tax payments in response to Trump’s threats to cut funding to California
- California pays approximately $80 billion more in federal taxes than it receives back, according to Newsom
- Bessent advised Newsom to consider implementing Trump-style tax cuts instead of risking felony charges
- The dispute comes as California faces a significant budget deficit and has requested $40 billion in fire relief funds
Bessent Accuses Newsom of Planning Tax Evasion
U.S. Treasury Secretary Scott Bessent has issued a stern warning to California Governor Gavin Newsom, accusing him of threatening to commit criminal tax evasion. The confrontation began after Newsom suggested withholding California’s federal tax payments in response to President Trump’s threats to cut funding to the state. Bessent’s accusation represents a significant escalation in the already tense relationship between the Biden administration and California’s leadership during a time of fiscal challenges for the state.
The Treasury Secretary didn’t mince words in his assessment of Newsom’s proposal, stating that the governor’s plan would “defraud the American taxpayer and leave California residents on the hook for unpaid federal taxes.” This statement highlights the potential consequences not just for state government but for individual California taxpayers who could find themselves legally responsible for unpaid federal taxes if Newsom follows through with his threat.
California’s Financial Stakes and Federal Dependency
Governor Newsom’s threat stems from his claim that California contributes significantly more to federal coffers than it receives in return. According to Newsom, “Californians pay the bills for the federal government. We pay over $80 BILLION more in taxes than we get back. Maybe it’s time to cut that off.” This statement reflects long-standing frustrations in California about its financial relationship with the federal government, particularly under administrations perceived as hostile to the state’s policies.
“Californians pay the bills for the federal government. We pay over $80 BILLION more in taxes than we get back. Maybe it’s time to cut that off.”, said Gavin Newsom.
The timing of this dispute is particularly problematic for California, which currently faces a substantial budget deficit. The state’s Medicaid program is borrowing money to maintain operations, and California has requested $40 billion in fire relief funds from the federal government. These fiscal realities make the state’s position precarious if it were to engage in a financial standoff with Washington.
Legal Ramifications and Federal Law
Bessent’s warning to Newsom highlights the serious legal implications of withholding federal tax payments. Under federal law, willfully attempting to evade taxes constitutes a felony offense. The Treasury Secretary emphasized that Newsom’s proposed actions could place businesses and payroll officials in California in the position of violating federal tax laws, potentially exposing them to criminal liability. Unlike the federal government’s relatively well-defined ability to withhold funding from states, the constitutional basis for a state refusing to remit federal taxes is unclear at best.
“Governor [Gavin Newsom] is threatening to commit criminal tax evasion. His plan: defraud the American taxpayer and leave California residents on the hook for unpaid federal taxes.”, said Scott Bessent.
Bessent described Newsom’s comments as “extremely reckless” and advised the governor to reconsider his approach. The Treasury Secretary suggested that instead of risking criminal charges, Newsom should consider implementing a tax plan similar to the Trump Tax Cuts to reduce California’s state tax burden. This recommendation represents a more conventional approach to addressing California’s fiscal concerns while avoiding the potential legal pitfalls of defying federal tax law.
Broader Federal-State Tensions
The tax dispute represents just one front in a broader conflict between California and the federal government. Newsom’s government has filed numerous lawsuits against the Trump Administration over policies including immigration enforcement and transgender rights. Recently, President Trump threatened to withhold federal sports funding after California defied a federal transgender policy, and the Transportation Department has suggested reclaiming federal funds from California’s troubled high-speed rail project.
Adding to the tension, White House border czar Tom Homan has also warned Newsom and Los Angeles Mayor Karen Bass of potential criminal investigations if they impede federal immigration operations. Homan specifically criticized Newsom’s sanctuary policies, stating, “If he cared about public safety in the state of California, he would not have a sanctuary for criminals, where criminals get released to the street in this state every day because of his policy.”
The Trump administration has reportedly considered terminating federal grants to California’s university systems, citing failures to address what it characterizes as anti-American and antisemitic activities on campuses. This potential funding cut appears to be one of the primary triggers for Newsom’s tax withholding threat, demonstrating how educational policy disputes can quickly escalate into broader fiscal confrontations.
