Breaking Down California’s New Higher Gasoline Tax
The California Legislature and Gov. Jerry Brown just passed a bill that will plow $52.4 billion in taxes and fees aimed at shoring up California’s freeways, roads and bridges.
The measure, known as Senate Bill 1 or the Road Repair and Accountability Act, will eventually add 12 cents a gallon in gasoline taxes in the state.
But that’s only part of the story.
According to an organization that studies tax policy, when the new tax is added to fees and levies that are already in place, California is on pace to come within one cent of having the highest gasoline tax burden in the country.
“I suspect in many cases people don’t know what the full tax burden they’re experiencing really is,” said Jared Walczak, policy analyst at the Tax Foundation, a think tank based in Washington, D.C. that studies tax policies and looked at California’s numbers.
How does that happen?
Because of all the individual components that go into California’s gas tax.
For one thing, there are actually two excise taxes on gasoline in the state — a primary excise and a secondary excise tax.
“In California this is unique in that you literally have a second excise tax,” Walczak said. “That’s pretty rare.”
The state’s Board of Equalization, the agency that oversees tax and fee collection, adjusts the excise tax on gasoline based on projections on consumption and gas prices.
According to figures the board provided to the Union-Tribune, the total amount in excise taxes will reach 41.7 cents per gallon on Nov. 1.
A few other tweaks will follow before the rate will be fixed at 47.3 cents a gallon in July 2019.
But it doesn’t end there because there are other taxes and fees on gasoline already in effect.
There is an underground storage tank fee that comes to 2 cents per gallon that fuel experts say applies to the overwhelming number of gas stations in the state.
Plus, California is one of just six states that charge a sales tax on gasoline. The Golden State’s 2.25% sales tax fluctuates according to the price of gasoline and Walczak estimated that it works out to about 9 cents a gallon at current prices.
So by 2019, when you take all taxes and fees together in California, you get:
• 47.3 cents in primary and secondary excise taxes.
• 2 cents on the underground storage tank fee.
• 9 cents on the sales tax (as per the Tax Foundation estimate).
• Total: 58.3 cents per gallon in total taxes and fees on gasoline in California.
Right now, California ranks seventh-highest in the country when it comes to total taxes and fees, according to figures calculated by the American Petroleum Institute.
Pennsylvania has the highest gas tax burden, at 59.3 cents a gallon, meaning that by mid-2019 California will be just one cent behind the top spot, barring changes by other states.
But the taxes don’t end there.
The federal tax stands at 18.4 cents a gallon.
When that is added, California motorists are paying 76.7 cents per gallon in state and federal taxes every time they go to the gas station.
“You start peeling back that onion, there’s a lot of layers in there and it’s a lot of money,” said David Hackett, president of Stillwater Associates, a transportation energy consulting company in Irvine.
The Union-Tribune e-mailed Gov. Brown’s office for comment on the breakdown of gasoline taxes and fees but did not receive a response.
Diesel drivers have been hit even harder.
The diesel excise tax will go up 20 cents a gallon and the diesel sales tax will see a 5.75% increase.
Walczak said the Tax Foundation actually looks favorably on gasoline taxes as a way to increase transportation revenue because those paying for the tax are the same ones getting the benefit from the money raised.
“The question is always one of balance,” Walczak said. “California is certainly on the leading edge in the country in terms of where its tax burdens are. We are a nonpartisan, nonprofit organization. We don’t try to answer the spending question … These are questions that ultimately Californians need to answer.”
Supporters of SB1 have pointed to the need to dramatically upgrade California’s transportation infrastructure.
The head of the Los Angeles Area Chamber of Commerce estimated that each dollar spent on roads, highway and bridge improvements results in $5.20 in lower car repairs and road maintenance costs while improving fuel consumption and road safety.
Analysis of the bill in Sacramento said rough roads result in each driver in California spending about $700 a year in extra vehicle repairs.
Republican critics of SB1 say in the past the state has diverted funds earmarked for transportation infrastructure to other spending programs while Democrats who supported the bill say an amendment to the state’s constitution and a new office put in place to track spending will help prevent misusing the money.
SB1 also includes a number of other tax increases and fees, including creating an annual vehicle licensing fee that starts in January, ranging from $25 for cars valued at less than $5,000 to $175 on cars worth $60,000 or more.
The $52.4 billion package during the next decade also hits buyers of zero-emission vehicles, or ZEVs. For the first time, owners of clean-energy cars will pay $100 each year, although it won’t go into effect until July 1, 2020 and applies only to the sale of new ZEVs.
“Part of the reason you’re levying a gas tax is that you recognize every car, whatever car it is, contributes to congestion and wear and tear on the roads,” Walczak said.
The new ZEV licensing fees of $100 may lead to complaints from some buyers of new clean-energy cars but could be considered a bargain compared to the tax burden for drivers of gasoline-powered vehicles.
Consider that if a driver of an internal combustion vehicle puts 12,000 miles on a car that gets 25 miles per gallon, that person would pay about $280 a year in state gas taxes and fees, using the 58.3 cents-per-gallon figure.
That’s almost three times more than the $100 ZEV fee.
And there are a couple of other things.
First, California pays an average of 67 cents more per gallon than the national average for regular gasoline, due in part to the state’s requirements for cleaner-burning gasoline that reduces smog but is more expensive to refine.
And second, on April 11, the U.S. Energy Information Administration predicted the price of gasoline on the West Coast will be about 8% higher this summer.
