Treasury Secretary Scott Bessent has issued a stern warning to California Governor Gavin Newsom after the Democrat threatened to withhold federal tax payments amid an escalating dispute over transgender athletes in school sports. The confrontation began when President Donald Trump vowed to impose "large scale fines" on California for allowing a biological male to compete in girls' sports competitions.
According to Fox Business, Bessent condemned Newsom's suggestion as "extremely reckless" and warned that such actions would constitute criminal tax evasion, potentially leaving California residents and businesses liable for unpaid federal taxes.
The dispute centers on transgender athlete AB Hernandez, who recently won first place in the girls' high jump and triple jump events at the California state competition while taking second in the long jump. California's Interscholastic Federation had amended its rules to accommodate transgender athletes by allowing four finalist spots instead of three in events where Hernandez earned medals.
Trump triggered the confrontation with a post on Truth Social, declaring, "A Biological Male competed in California Girls State Finals, WINNING BIG, despite the fact that they were warned by me not to do so." The president added that Governor "Gavin Newscum fully understands, large scale fines will be imposed!"
Newsom responded by threatening to withhold California's substantial contribution to federal coffers. "Californians pay the bills for the federal government," Newsom wrote on X. "We pay over $80 BILLION more in taxes than we get back. Maybe it's time to cut that off, @realDonaldTrump."
Bessent quickly moved to counter Newsom's threat, posting on X that such actions would constitute tax evasion and defraud American taxpayers. The Treasury Secretary wrote that he was "certain most California businesses know that failing to pay taxes owed to the Treasury constitutes tax evasion and have no intention of following the dangerous path Governor @GavinNewsom is threatening."
Bessent's warning to California officials was particularly pointed, suggesting they could face personal consequences for following through on Newsom's threat. His message targeted state officials specifically, including payroll managers who might be involved in implementing such a policy.
"I would warn state officials, including payroll managers, that federal law attaches personal liability to an attempt to evade or defeat tax," Bessent stated in his social media post, elevating the stakes for any California official who might consider implementing Newsom's suggestion.
Instead of pursuing what he called "criminal tax evasion," Bessent suggested California adopt tax policies more aligned with Trump's approach. "Governor Newsom should consider a tax plan for California that follows the Trump Tax Cuts model and reduces the onerous state tax burden to allow families to keep more of their hard-earned money," he advised.
The California Interscholastic Federation's accommodation for transgender athletes has already drawn federal scrutiny. The Department of Justice has launched a probe into potential Title IX violations regarding California's policy on transgender athletes in girls' sports.
This federal investigation comes in addition to an ongoing Department of Education inquiry that began in February. The multiple federal investigations highlight the growing tension between state and federal authorities over the issue of transgender athletes participation in school sports.
The recent state competition showcased the Federation's compromise approach. Hernandez had to share podium spots with female athletes who finished one position behind after the finals on Saturday, a temporary change that granted female athletes qualification and podium finishes they would have earned had a biological male not competed.
The unprecedented threat to withhold federal tax payments marks a significant escalation in the ongoing tension between the Trump administration and California. Newsom's suggestion that the state might leverage its substantial federal tax contributions represents a novel approach to state resistance.
California's economic power gives particular weight to Newsom's threat. The state recently overtook Japan to become the world's fourth-largest economy, underscoring its financial significance both nationally and globally. This economic clout has emboldened California's leadership in challenging federal policies.
Bessent's characterization of Newsom's proposal as "extremely reckless" highlights the Biden administration's view that such actions would cross a fundamental line in federal-state relations, potentially triggering a constitutional crisis over tax authority and collection.
