California Business Leaders Fight to Save New Fuel Tax
It’s not often the California Chamber of Commerce endorses a tax increase.
You are more likely to see such legislative proposals — on high-income earners, on services, on corporations — make the “job killers” list that the state’s largest business advocacy organization puts out each year to beat back bills it doesn’t like.
But when Gov. Jerry Brown and Democratic lawmakers last year passed a measure raising fees on transportation fuels and vehicle registration to pay for road repairs, it was because CalChamber, and the larger California business community, helped push it across the finish line.
Their support, along with the money and the bully pulpit it brings, will be essential for the coalition waging an uphill campaign to preserve the tax plan. Public polling indicates that California voters are ready to approve an initiative this November that would repeal the 12-cents-per-gallon hike on gasoline, 20-cents-per-gallon increase for diesel and new annual fee for cars based on their value.
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“The roads are pretty miserable here in California. They’ve been neglected for quite some time,” CalChamber CEO Allan Zaremberg said. “The economy depends on people being able to get to work in their cars and buses and being able to move goods.”
The business community always has been supportive of what it considers “necessary infrastructure investment,” Zaremberg said. In January, the U.S. Chamber of Commerce proposed hiking the federal gas tax 5 cents per year for the next five years to raise money for upgrades to highways, bridges and transit systems.
Zaremberg points out that nearly every aspect of the California economy relies on having usable roads: the transfer of goods from busy ports and warehouses to retailers, emerging sectors like on-demand rides and food delivery, and even tourists driving to San Francisco or Disneyland.
“We have to have a transportation system that allows us to sustain those jobs,” he said.
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And this is the fairest way to do it, he argues. While the CalChamber usually objects to taxes that target just the business community or one industry and nobody else, Zaremberg said raising the gas tax is similar to a user fee, because it costs more the more you drive: “You get something in return equal to what you pay.”
CalChamber and dozens of local business associations already have joined the campaign against the repeal measure, which will appear on the ballot this fall as Proposition 6.
Zaremberg said he doesn’t know how much he expects to spend on the campaign. That will depend, he said, on whether proponents – including the Republican Party, which has banked on the initiative as a crucial strategy to drive up conservative turnout in November – plan to run a statewide race or focus on targeted House districts where Democrats are trying to take out GOP incumbents.
Several of those congressional candidates have contributed six-figure sums to the repeal effort, calling the fees an unfair burden on drivers already struggling with California’s high cost of living.
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Republican businessman John Cox also has made the tax repeal the central issue of his gubernatorial campaign. He criticized Democrats for “sticking their hands in the pockets of Californians” and promised to use transportation revenues more efficiently if he is elected.
The opposition has raised more than $12 million so far to fight the repeal, primarily from construction companies and building trades unions, as well as from the League of California Cities and the California Democratic Party. Brown, who worked for several years to get the tax plan through the Legislature, has nearly $15 million available in his campaign account.
But not everyone is so eager to talk about a policy that is hitting consumers at the pump.
The trucking industry, which will see significant cost increases from the fuel taxes, came on board last year after a provision was added to the bill giving them a break on some anti-pollution rules so they could use older trucks for longer. The California Trucking Association, which has joined the coalition against the repeal, declined an interview request.
Half a dozen individual companies that expressed their support for the tax plan as it was moving through the Legislature last year — including Alaska Airlines, Bank of the West, Facebook, Google, Nextdoor and the San Francisco 49ers — did not respond to questions about their position or whether they planned to get involved with the campaign.
A notable exception is the agriculture industry, which was widely opposed to the new fees as they advanced through the Legislature. The National Federation of Independent Business this month also joined the repeal campaign, urging the state to use existing tax revenues for the road repairs.
The Western Growers Association, which represents farmers across several states, gave $100,000 last December to help qualify the initiative, one of the only major donations to the campaign that hasn’t come from a Republican politician. The organization declined an interview request but provided a statement from January, in which it expressed concern over how the money would be spent.
“Our industry is heavily impacted by California’s already high gas and diesel taxes, but we were presented SB 1 as a finished product. We have now been presented with a viable mechanism to force a do-over by the next Legislature, with the consent of the state’s voters, and we believe this would be in the best interests of California’s farmers,” association CEO Tom Nassif said.
Jim Houston, manager of government and legal affairs for the California Farm Bureau Federation, wrote in an e-mail that agriculture groups unsuccessfully sought a remedy in the tax bill similar to the one the trucking industry received. He said that, by 2023, they will have to upgrade any trucks with engines older than the 2010 model year, even though their vehicles are driven only a few thousand miles per year and will be far from the end of their useful lives.
“Our families simply cannot afford to spend hundreds of thousands – if not millions – of dollars to replace these vehicles. We have heard from many farmers that this rule alone will push their operations over the edge and likely mean the end to many multigenerational family farms,” Houston wrote. “Farmers are not, and never have been, able to pass these costs along.”
Agriculture companies are part of CalChamber, which complicated the organization’s support for the gas tax hike and new vehicle registration fees. Zaremberg acknowledges “there’s nothing perfect for everybody,” but he argues the much-needed road maintenance ultimately will benefit farmers as well, allowing them to get their produce to ports and restaurants.
“Agriculture doesn’t do any good if it stays in the fields in the Central Valley,” he said.
