California poised to have highest gas tax in the country
On July 1, the excise tax on gasoline in California will go up 5.6 cents a gallon, enough to push the state’s total taxes and fees past Pennsylvania to become the highest in the nation.
The 5.6-cent increase represents the second iteration of Senate Bill 1, commonly called the gas tax, that was passed by the Legislature in Sacramento in the spring of 2017 and signed into law by then-Gov. Jerry Brown.
Under the terms of SB1, the tax increase comes in stages.
Drivers first experienced a 12-cent per gallon rise at the pump in November 2017. An additional 5.6 cents per gallon will be tacked on at the beginning of next month, which will boost the state’s total excise tax to 41.7 cents a gallon.
Add in other state taxes and fees plus the federal government’s own 18.4 cents a gallon excise tax and Golden State motorists will pay 79.18 cents a gallon in taxes and fees whenever they fuel up.
That will move California into the top spot in the country, edging past the 77.1 cents a gallon drivers in Pennsylvania pay in combined taxes and fees, according to state-by-state data compiled by the American Petroleum Institute.
"What it means is California is probably never going to see sub-$2 (a gallon) prices again, unless it’s done artificially,” said Patrick DeHaan, head of petroleum analysis at GasBuddy, a tech company that helps motorists find the cheapest gasoline in a given area.
“Even at $2 and change, one-third of it is going to the state and other taxes,” DeHaan said. “So it’s just going to make the norm for gas prices higher and higher and it’s just inevitable that in time California is going to ultimately reach all-time high gas prices and taxation is going to be a bigger part of the equation
than it’s ever been before.”
At the same time, the impact of the 5.6 cents per gallon increase may be muted because it comes as gasoline prices in California are heading lower.
After cracking the $4 a gallon mark for regular in mid-April, the average price in the state has retreated as some California refineries that had been sidelined due to fires and scheduled maintenance have come back online.
“I don’t know that there’s ever a good time for a tax increase, but I think it’s a little easier for motorists to digest in a climate of falling prices instead of rising prices,” DeHaan said.
“That may offset some of the bite that will be coming.”
DeHaan was quick to point out, though, that tensions in the Middle East could result in sharp increases in global crude oil prices. After Iran shot down a U.S. Navy drone over the Strait of Hormuz, the price of West Texas Intermediate and Brent crude on Thursday jumped 5.4% and 4.3 percent, respectively.
David Hackett, president of Stillwater Associates, a transportation fuels consulting company in Irvine, said when other associated taxes and fees are accounted for, California surpassed any other state in gasolinerelated costs long ago.
For example, the state’s Low Carbon Fuel Standard and the fee supporting the state’s cap-and-trade program on carbon emissions combine to add about 30 cents per gallon.
Both fees are collected as part of the state government’s efforts to improve air quality and the revenue collected goes to the California Air Resources Board, rather than the state’s tax agencies.
Hackett said the 5.6-cent increase will be paid by gas station owners immediately on July 1 when they receive their invoices on new deliveries of fuel. “The phase-in takes about a day or two” to take effect for consumers, he said.
“Some consumers when they fill up, they get 20 bucks worth” of gas, Hackett said. “That consumer on a budget really feels it that when the prices change because they get some more or some less gas,” depending on which direction the price goes.
Called the Road Repair and Accountability Act, SB 1 will raise $52.4 billion over 10 years. More than $3.2 billion per year will go a Road Maintenance and Rehabilitation Program that includes $400 million for bridges and culverts, $200 million for local entities and $100 million for bicycle and pedestrian projects.
In addition, the legislation increased the excise and sales taxes on diesel fuel and created a licensing fee ranging from $25 per year for vehicles valued at less than $5,000 to $175 for cars worth $60,000 or more. It also, for the first time, imposed a $100 fee on zeroemission vehicles that will start in 2020.
The tax rates and fees in SB1 will also be adjusted for inflation each year.
The gas tax proved controversial. An attempt to repeal SB 1, led by radio talk shot host and former San Diego city council member Carl DeMaio, made it onto the statewide ballot in November 2018 but Proposition 6 lost, 56.8% to 43.2 percent.