California gasoline prices have been dropping sharply of late – below $2 a gallon in some areas.
That’s still somewhat higher than those in many other states, and some self-described consumer groups are still trying to portray California motorists as victims of oil industry greed.
However, most, if not all, of the remaining differential can be explained by our unique fuel blends, aimed at curbing air pollution, coupled with California’s generally higher business operational costs and, finally, our relatively high gas taxes.
We have the nation’s fourth-highest fuel taxes by one recent survey, and they may be the highest if the dime-a-gallon impact of placing fuel in the “cap-and-trade” carbon emissions program is added.
Meanwhile, as high as California’s fuel taxes may be, there’s a simmering debate in the Capitol over whether they should be raised to reduce a backlog of much-needed roadway repairs and/or whether gallonage taxes should be scrapped altogether in favor of mileage-based levies that would hit electric and hybrid car owners.
As retail gas prices decline, taxes become an ever-greater portion of those prices, even though the taxes themselves are declining because of declining prices. And if that sounds confusing, it’s because the state’s politicians have made it so.
For many years, the state’s fuel levies were split between a gallonage tax – last increased in 1994 – and a sales tax applied to the retail price.
However, in 2010, then-Gov. Arnold Schwarzenegger and legislators enacted a “fuel tax swap” that eliminated the state’s sales tax on gas (but not local sales taxes) and decreed that the gallonage tax would be increased by an equivalent amount.
The swap was one of those complex maneuvers that politicians do for ancillary purposes.
In this case, it was to create a legal revenue stream for servicing billions of dollars in transportation-related bonds without tapping a general fund that was leaking red ink.
Later, a ballot measure voided the maneuver, so bond service was shifted again to truck weight fees, with the same financial effect.
The gas tax replacement for the sales tax was tabbed at 17.3 cents per gallon and the Board of Equalization was tasked with adjusting it each year to continue its equivalence to the sales tax.
It later grew to 18 cents a gallon, but last year, the board cut it by six cents as gas prices started to decline, thus slashing transportation revenues by nearly $900 million.
That spurred a drive to eliminate the adjustment, as a part of any comprehensive transportation tax deal.
However, Republican opposition to new taxes has stalled a deal, and the Board of Equalization is likely to cut the tax by another two cents a gallon later this month due to continued price declines.
The California Transportation Commission projects a $754 million drop in revenues over the next five years and says it must cut back projects accordingly – a move widely seen as pressuring Republicans on a tax increase.
As the wheel turns.