The fuel-tax swap
A few weeks ago, the State Board of Equalization, in a 5-0 vote, cut the excise tax on gas by 3.5 cents a gallon starting on July 1. The excise gas tax is such a convoluted tax that the State Board of Equalization staff was reduced to using Lego pieces at a press conference as a visual explanation of how and why it was being lowered. Last year it went up 3.5 cents. Who knows what will happen in 2015.In 2002, Californians placed Proposition 42 into law. It stipulated that the gasoline sales tax actually had to be used for transportation purposes.
In 2010, however, the governor and Legislature needed additional dollars to pass a budget, so they decided to raid transportation monies and you have what is now known as the “Fuel Tax Swap”. It swapped the State Sales tax portion, the part bound by Proposition 42 to go to transportation uses with the Excise Tax portion. It pretty much repealed the State Sales tax on gas and raised the Excise Tax and then added in an annual index. The 3.5 cents per gallon decrease we will see in July is that index.
As Jaime Garza, the deputy director of external affairs confirmed at the recent BOE press conference and Lego Day, the Board of Equalization doesn’t have the authority to raise or lower taxes. This entire exercise is only to “adjust to achieve revenue neutrality.” The State Legislature stated that each year the California State Board of Equalization would set the tax adjustment. The BOE staff estimates what they think the consumption of gas will be in the upcoming year and how much that gas will cost. They then set a gas rate that will produce the amount of revenue equal to what a state sales tax would have produced during the upcoming year. The use of Lego pieces is starting to look pretty brilliant isn’t it?
The Board’s Vice-Chair Michelle Steel actually said she thought the estimate was “just a guessing game” and “a scheme intended to take money that was earmarked for transportation projects and use it to pad the state’s general fund.”
She is correct. This is simply a shell game to transfer monies the taxpayers of California intend to go to our drastically under-funded infrastructure and allow it to be used for whatever the majority in Sacramento wants. California taxpayers are some of the highest taxed individuals in the United States. Our gas tax, at nearly 72 cents a gallon is the highest gas tax in the nation. With the decrease of 3.5 cents in July we move down to #2. But not for long.In just a year, California’s cap and trade system for pollution credits will expand to cover vehicle fuels and drivers could potentially see gas prices raise close to 12 cents a gallon.
In addition, California Senate Leader Darrell Steinberg has floated the idea of a straight carbon tax to discourage drivers from using their automobiles. Starting at 15 cents a gallon with the ability to grow, CalWatchDog reports that Steinberg stated he wants to spend the new carbon tax to “improve public transportation and provide an income tax rebate to families earning less the $75,000.” There is also a bill pending in the California Legislature that would impose an extraction tax on California oil companies driving our gas prices even higher. Senator Steinberg stated in a recent speech at the Sacramento Press Club, “If carbon prices don’t sting, we won’t change habits.”
I don’t know how much more California taxpayers and businesses can take.
By Carolyn Cavecche, President & CEO of Orange County Taxpayers Association
Published in the Orange County Register, Mar. 10, 2014