Treasury Secretary Scott Bessent has warned Governor Gavin Newsom that withholding federal tax payments over funding disputes could amount to criminal tax evasion with serious legal consequences.
At a Glance
- Bessent accused Newsom of plotting criminal tax evasion over threats to stop forwarding federal tax revenue.
- Newsom claimed California pays $80 billion more to Washington than it receives, suggesting it should “cut that off.”
- The Trump administration is considering defunding California universities over alleged anti-American content.
- Legal experts say businesses and payroll officers could face felony charges if tax withholding proceeds.
- Bessent urged Newsom to adopt Trump-style tax cuts instead of escalating tensions with federal authorities.
Political Fight Turns Criminal Warning
The clash began when Governor Gavin Newsom responded to reports that the Trump administration was preparing to cut federal funding to California’s public universities over allegations of “anti-American” and antisemitic speech. Newsom lashed out, claiming California sends more to the federal government than it gets back, tweeting, “We pay over $80 BILLION more in taxes than we get back. Maybe it’s time to cut that off.”
Treasury Secretary Scott Bessent fired back, calling the suggestion a plan to “defraud the American taxpayer.” In a pointed rebuke, he warned that the proposal could constitute felony criminal tax evasion, placing California officials and even private payroll processors at legal risk. “Governor @GavinNewsom is threatening to commit criminal tax evasion,” he posted on X.
Watch a report: California’s Tax Revolt: Political Statement or Criminal Act?.
Legal Stakes Mount
The Treasury Secretary stressed that federal law places “personal liability” on those who withhold or fail to remit federal taxes, meaning California’s companies and government agencies could be prosecuted if Newsom’s strategy is implemented. He called Newsom’s comments “extremely reckless” and urged alternative solutions.
Bessent suggested that instead of provoking a constitutional crisis, the governor should consider cutting state taxes using Trump-era playbooks. “That would lower California’s burden without risking felony charges,” he argued.
Meanwhile, White House officials downplayed the immediacy of any funding cuts, noting that “no final decisions” had been made. California lawmakers, however, have already begun preparing legal countermeasures.
State vs. Federal Power Clash
At the heart of this escalating dispute is California’s role as the largest “donor state” in America, contributing far more in federal taxes than it receives in spending. In 2022, the state paid $692 billion and received only $609 billion back—a difference of $83 billion.
This imbalance, Newsom argues, justifies the threat. But critics say such defiance could dangerously blur the lines of legal authority. Assembly Speaker Robert Rivas echoed support for a strong response, warning that proposed cuts to education funding may violate constitutional protections.
With federal and state officials now entrenched, the conflict tests the boundaries of fiscal federalism. If Newsom moves forward, courts may have to decide whether defunding schools justifies withholding taxes—or whether such defiance constitutes a crime.
