Overview

• Governor Gavin Newsom warned that California could retain state-collected federal taxes if the administration follows through on proposed funding reductions.
• White House spokesperson Harrison Fields confirmed an active review of wide-ranging grant and program cuts targeting California, with no decisions finalized.
• Republican lawmakers criticized Newsom’s proposal as reckless and a new low, arguing it would conflict with constitutional taxing authority.
• Treasury Secretary Scott Bessent cautioned that any attempt to withhold federal tax receipts would prompt immediate legal challenges under existing court precedents.
• Tax experts say the logistics of withholding federal taxes are unclear and legally fraught, noting California contributed about $83 billion more to Washington than it received in fiscal 2021–22.