Taxes, Taxes, and More Taxes: California’s Latest Gas Tax Increase
As of November 1st, 2017, Californians started paying more at the pump. An additional .12 cents per gallon in gasoline tax went into effect last week, with additional increases to follow. This increase was the first phase of a decade-long plan orchestrated by Democratic Governor, Jerry Brown, to generate over $50 billion in new revenue. Including this increase, plus the ones scheduled over the next 32 months, total taxes will be increased by .29 cents per gallon. Additionally, a .20 cent per gallon increase in diesel fuel pricing will also take place, and help contribute to the program revenue. Current estimates of the initial .12 cent increase are expected to cost the average family about $1,200.00 annually. However, what isn’t being reported is how the increased diesel fuel taxes will impact the price of food, consumer goods, and everything else which moves by diesel-powered trucks.
Governor Brown signed Senate Bill 1, known as the Road Repair and Accountability Act of 2017, into law earlier this year (April 28th, 2017.) The massive increase was part of an overall strategy of raising enough money to make critical road, bridge, and related transportation improvements. The plan is expected to generate $52.4 billion dollars over the next decade. The increases in fuel tax will be coordinated with a new transportation improvement fee; one tied to vehicle value, to generate more funding. As part of the legislation, motorists will also have to pay an annual vehicle fee, starting with any renewal after Jan. 1, 2018. The fees will range from $25 for cars worth less than $5,000 up to $200 for those valued at more than $60,000. The decision to push the largest gas-tax increases in California’s history is viewed as risky for Governor Brown, especially since it was not blessed by the voters.
Opposition the the Bill
Opponents of the new gas tax are already seeking support for a ballot initiative in to repeal it. The California Repeal Gas Tax and Fees Increase Bill initiative could be on November, 2018 ballot if enough support is generated. Lawmakers have already been discussing a proposed amendment to the state Constitution that will keep lawmakers from being able to divert any of these funds elsewhere. Voters are expected to see this come up for vote in June, 2018. It’s an odd approach that many on the pro-tax side see as a way to get after-the-fact voter support by demonstrating it’s not just another way of fleecing the residents. Opposition and support for the repeal seems strong, with studies done earlier this year showing 58% of those surveyed disagreed with the legislation.
New Revenue For Transportation
The new revenue stream will be used to support multiple local and state road programs, plus public transportation and traffic congestion reduction programs. Some of the goals are to fix at least 500 bridges, and bring at least 98% of state highways to a good or fair condition status and improve culvert conditions to good or fair. Also funding will be released for additional police and maintenance in public transportation stations and improving train cars. The bill will also provide grants to municipalities to make new train car purchases to add capacity. Again, what is not being discussed, is the dismal expectations after such a large investment. At best, the roadways in California would be improved to a good status, which on the surface seems unacceptable.
Consequences of Raising Taxes
The new law also calls for the creation of yet another bureaucratic office; The Independent Office of Audits and Investigations. This new agency will be tasked with ensuring the funds are used only for transportation projects. It’s another odd approach, especially with the already scheduled vote on a Constitutional amendment which does the same function. The bigger question many voters may be thinking is why it’s even necessary in the first place. There are currently legal challenges being introduced, to what is being called partisan attempts to derail any opposition to the new law. These challenges as well as the muscle behind the repeal initiative are being led by State Assemblyman Travis Allen.
Assemblyman Allen seems to have a strong case in his attempt to gather support. In 2002, then Governor, Gray Davis championed an increase in vehicle registration fees (increasing them from $46 to $158.) It led to a recall vote which ushered him out of office eleven months later and brought the state a Republican Governor, Arnold Schwarzenegger. Allen is actively campaigning to be the next Governor of the state. He’s certain to face stiff questions related to the roads in his campaign. They are in terrible condition across the state, and some see Governor Brown’s plan as better than no plan at all.
Highlights of SB-1 from a Cost Perspective
Senate Bill 1 (SB-1), also known as the Road Repair and Accountability Act of 2017, was passed on April 6, 2017 and signed into law by Governor Jerry Brown on April 28, 2017.
Effective November 1, 2017, the provisions of the bill mandate:
Increases in the gasoline tax by $0.12 per gallon.
Increases in the diesel fuel tax by $0.20 per gallon.
An additional increase of the sales tax on diesel fuels by 4 percentage points.
Effective January 1, 2018, new annual vehicle fees will be mandated:
$25 per year for vehicles with a market value of $0-$4,999;
$50 per year for vehicles with a market value of $5,000-$24,999;
$100 per year for vehicles with a market value of $25,000-$34,999;
$150 per year for vehicles with a market value of $35,000-$59,999; and
$200 per year for vehicles with a market value of $60,000 or higher.
SB 1 was designed to charge owners of model year 2020 zero-emission vehicles $100 per vehicle starting in 2020.
Complete Text of California SB-1
SB-1 Transportation Funding Bill -- Complete Text
- Bill Text - SB-1 Transportation funding.
Complete text of California SB-1
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© 2017 Ralph Schwartz