The ripple effects of the gasoline tax increase
April 24, 2017
By Rob Nikolewski, The San Diego Union-Tribune
In an indication of just how much California is affected by gasoline prices, at least three different groups on Monday weighed in on the ramifications of Senate Bill 1, the $52.4 billion effort passed by Gov. Jerry Brown and the Legislature earlier this month.
One organization that concentrates on policy solutions to reduce California’s greenhouse gas emissions said that while SB1 is “a good start,” it ultimately won’t provide a long-range solution for keeping the state’s roads in good shape.
A software company that helps organizations deal with tax compliance issues says SB1 will have a negative effect on the nascent ride-sharing industry.
And the head of a transportation energy consulting company says the tax burden on drivers across the state is actually higher than previously reported.
On Sunday, the Union-Tribune looked at the total tax burden motorists will pay once SB1 goes into full effect in July 2019.
The bill will raise the excise tax on gasoline 12 cents but when state taxes and fees that are already in place are factored, the figure reaches 58.3 cents per gallon, which would put California second-highest in the nation, trailing only Pennsylvania.
And when the federal tax of 18.4 cents a gallon is added, California motorists will pay 76.7 cents per gallon, according to numbers compiled by the Tax Foundation and the American Petroleum Institute.
But industry analyst David Hackett, president of Irvine-based Stillwater Associates, said Monday the figure is higher than that.
He pointed to two other fees — the Low Carbon Fuel Standard that adds 3.7 cents per gallon of gasoline and the fee supporting the state’s cap-and-trade program on carbon emissions that comes to 11.4 cents a 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.
“That adds another 15.1 cents per gallon that isn’t counted as a ‘tax,’” Hackett said.
Adding 15.1 cents to the aforementioned 76.7 figure leads to a total cost burden in California of 91.8 cents a gallon.
That’s a good chunk of money but when it comes to the reason SB1 was passed — to improve the state’s roads, bridges and assorted transportation infrastructure needs — an environmental think tank on Monday said the gasoline tax is on its last mile.
“The way California is funding its road infrastructure is not sustainable over the long run and California needs to find new ways to fund our roads separate from the gas tax,” said F. Noel Perry, founder of Next 10, based in San Francisco.
Next 10 commissioned a report from Beacon Economics that found that while California has some of the highest fuel tax rates in the country, the amount the state is taking in has been declining and that has left roads in bad shape.
One reason why: The fuel efficiency of new cars keeps getting better. So while statistics show that gasoline demand is going back up and the number of vehicle miles in the state have reached record levels, motorists make fewer trips to the gas station.
In addition, while the percentage of zero-emission vehicles (ZEVs) is still statistically small compared to conventionally-powered cars, California still has 283,000 clean vehicles on its roads, the most of any state.
The study said if California policymakers succeed in their goal to put 1.5 million ZEVs on the road by 2025, it would lead to much less use of gasoline and that would mean a loss of $572 million in state gas tax revenue and $276 million in federal excise taxes.
“There’s probably not a single, silver bullet” to fix the impending problem, said Adam Fowler, manager of public policy research at Beacon Economics.
Potential solutions include congestion pricing in urban areas, constructing more toll roads and employing a user-tax based on mileage, which would charge drivers who are on the road the most.
But what about taxpayers who already complain about the price increases coming from SB1?
Fowler anticipates a vehicle mileage program would eventually phase out increases in gas taxes.
“These things are going to have a period of transition where you’re probably not going to be both paying one of the highest gasoline tax in the country and a getting a new usage fee” at the same time, Fowler said.
In the more immediate future, one observer predicts the higher gasoline tax will also affect people who may not even own cars and rely on ride-sharing services such as Uber and Lyft instead.
John Beaty, an excise tax specialist, said drivers will spend more on gas taxes and then pass their additional costs to their riding customers.
“It will have an impact,” said Beaty, who works for Avalara, a Seattle-based company that helps clients and small businesses with tax compliance issues. “I think customers will get more sensitive to peak-hour rates that the ride-sharing services charge … When you have to get from Point A to Point B and you don’t have a car, what are your options?”