California Gov. Gavin Newsom criticized President Donald Trump's proposed $5,000 dividend for adult Americans, arguing that citizens should first be compensated for billions in additional fuel costs tied to the Iran conflict.

Newsom took to X on Thursday to attack the proposal, which Trump said would be implemented if Republicans retain control of Congress in the November midterm elections. The governor described the plan as a scheme to buy votes.

Fuel Cost Disputes

Newsom stated that Republicans should reimburse Americans for more than $108 billion in extra gasoline and diesel expenses caused by the war with Iran. He attributed these costs directly to the conflict.

The Wall Street Journal reported this week that U.S. consumers have spent about $107 billion more on fuel than they would have without the conflicts. The estimate comes from Brown University’s Climate Solutions Lab and covers the period since the Iran war began on Feb. 28. The analysis compares actual prices with a counterfactual estimate excluding the conflict, while also incorporating disruptions from the Russia-Ukraine war.

Dividend Funding Mechanism

Trump described the payment as a dividend generated by economic strength. Commerce Secretary Howard Lutnick told NBC News that the funds would not come from taxpayer money or the federal deficit. He stated the administration would earn the money needed for the payments.

Economist Peter Schiff questioned how the government could afford the payouts while national debt rises. House Speaker Mike Johnson noted that the proposal requires congressional approval.

California Gov. Gavin Newsom proposed a federal billionaire tax on Friday, sparking a public clash with Tesla Inc. and Space Exploration Technologies Corp. CEO Elon Musk. The governor's proposal, outlined in a Substack post and video, calls for a national minimum tax on billionaires, arguing the wealthiest Americans should pay at least the same effective tax rate as their employees. Newsom also advocated for closing tax loopholes, revising inheritance rules, restoring corporate tax rates to pre-2017 levels, and creating a national public equity fund for AI-driven economic gains.

Musk responded by posting a side-by-side image comparing Newsom to Butt-Head, the cartoon character from "Beavis and Butt-Head," mocking the governor's proposal. Newsom shared Musk's post and replied, "Don't worry, we'll be taxing trillionaires even more. Time to cough up after all that California corporate welfare!" Musk, with a net worth of $946.7 billion according to Forbes, became the world's first trillionaire after SpaceX's public debut on June 12.

Former White House AI and crypto czar David Sacks criticized Newsom, stating on X that the governor's stance would push tech leaders to Texas. "Today was the day that Gavin Newsom was supposed to save the tech industry by cutting a deal to kill the Billionaire Tax Act. Instead, he came out as DSA-adjacent... See y'all in Texas!" Sacks wrote. Former White House Communications Director Anthony Scaramucci argued that Democrats risk hurting their electoral prospects by embracing higher taxes on the wealthy, suggesting market-based alternatives to address wealth inequality.

Key Proposals in Newsom's Plan

Newsom reiterated his opposition to California's proposed one-time 5% wealth tax on billionaires, arguing that taxing wealth state by state would encourage wealthy residents to relocate. "The fight to make the wealthiest Americans pay more in taxes is not one we should be fighting state by state," he wrote. The debate underscores growing tensions over wealth taxes and their potential impact on Silicon Valley and the broader economy.