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California gas tax, fee increases hit poor, middle-income people hardest

Poor to middle-income Californians -- pushed into suburbs for affordable housing -- have lower salaries, longer commutes; slightest increase gas tax is burdensome

Compton Herald | California gas tax
Photo source: U. S. Air Force/Rebecca Amber

Increased California gas tax, fees, could make $52 billion available for road repair and other services over a ten-year period; opponents seek to place a proposition on the November 2018 ballot

The Board of Equalization (BOE) was poised to raise gasoline taxes through a process directed by the legislature in 2010, referred to as a “gas tax swap.” But enough is enough! Californians cannot bear another gas tax increase.

At the February meeting of the BOE, the California Department of Tax and Administration recommended that the BOE raise the excise tax by 4 cents per gallon, which would have brought the total federal and state gasoline taxes and fees in California to 76.7 cents a gallon effective July 1, 2019. This takes into consideration that Senate Bill 1 enacted a 17.6 cent gas tax increase and a 20-cent diesel fuel tax increase and terminates the “gas tax swap” adjustment.

The legislature, not the BOE, has sole authority to raise gas taxes. The role of the BOE is to adjust the excise and sales tax rates based on previous gas consumption and prices to assure revenue neutrality based. This legislation resulted in a shift of transportation funds to the general fund to address the 2010 state budget crisis.

In April 2017, the legislature passed SB 1, the “Road Repair and Accountability Act of 2017,” which raised the gasoline excise tax by 12 cents effective Nov. 1, 2017, with an additional 5.6 cent increase in the gasoline tax effective on July 1, 2019. Then beginning in 2020 the California Department of Tax and Administration will adjust the gas tax according to the fluctuations in the Consumer Price Index. Based on the consumer index over the past few years, according to Department of Finance economic forecasts, this will result in endless increases in the gas tax.

In addition, the legislation increased the vehicle registration by $25-175, depending on the market value of the vehicle, and created the Road Improvement Fee of $100 for Zero-Emission Vehicles starting July 1, 2020.

These increased taxes and fees are proposed to collect an additional $52 billion in revenue for road repair and other services over a ten-year period. However, according to the law and confirmed by California Department of Finance economists, these tax increases never expire.

Board Member Diane Harkey argued that the state has a budget surplus and this additional tax is not warranted. “I understand the state’s budget is in a surplus, so I don’t know how anyone can justify increasing gas taxes,” Harkey said.

Opponents of the gas tax increase argue that the legislature deferred road maintenance, the purported reason for the taxes and fee increases, and that Californians should not have to pay for the legislature’s decisions to shift dollars to other purposes – they should shift the money back.

Studies show that the California gas tax is a regressive tax that disproportionately impacts poor to middle-income earners because they generally have a greater dependency on their vehicles for vacations, recreation, and work and less income to offset the increase.

As a general rule, any tax that requires the poor or seniors on fixed incomes to pay the same percentage or amount as a tax, is regressive, because it fails to take into consideration the disparate abilities to pay based on income.

Poor to middle-income Californians are pushed into the suburbs for affordable housing, have lower salaries, drive longer distances to work, and cannot afford the slightest increase in gas tax.

The California Department of Tax and Administration’s failure to include these market variables in their computations was not fair to the public and cast the “no” votes that resulted in a 2-2 tie and prevented the increase from passing. Board Member Fiona Ma and State Controller Betty Yee (represented at the meeting by Deputy Controller Yvette Stowers) voted for the increase and Board Member George Runner was not present.

This is not the end of the California gas tax debate. In response to SB 1, the public may have the final say in November 2018 as backers of an initiative to repeal the recent increase to the California gas tax and vehicle registration fee seek to place a proposition on the ballot to allow the voters to decide if they want to pay the additional $52 billion in gas taxes and vehicle registration fees.

Jerome E. Horton, represents the 3rd District, California State Board of Equalization. Horton is the only Member with 38 years of tax policy, law, and administrative experience. Horton is also the first African-American elected to the Board since its inception.

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