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State gas tax set to rise 3.5 cents per gallon beginning in July

Posted: June 27, 2013 4:31 p.m.
Updated: June 27, 2013 4:31 p.m.
 

Sacramento – July 1, 2013, the excise tax on gasoline will increase 3.5 cents per gallon, from a rate of 36 cents to 39.5 cents per gallon. Assembly Bill x8 6, Ch. 11, and Senate Bill 70, Ch. 9, which became law in 2010, lowered the sales and use tax rate on gasoline and increased the excise tax rate on July 1, 2010. The laws require the annual sales and excise taxes paid on gasoline to remain revenue neutral, assuring the tax burden on consumers is the same. These laws also mandate that the California State Board of Equalization (BOE) adjust the excise tax rate by March 1 of each year in order to ensure revenue neutrality.

Board Members are sensitive to the financial impact of higher gas prices, but state law requires the BOE to adjust the excise tax rate every year to achieve revenue neutrality. While gasoline consumption has been reduced slightly in recent years, in 2011 and 2012 the price of gasoline greatly and unexpectedly outpaced these modest declines in consumption. Higher gasoline prices mean the BOE must adjust the excise tax to make up for the sales tax loss, and achieve the revenue neutrality mandated by the legislation.

Gasoline sales tax revenues fund local government programs, while the state excise tax on gasoline funds highway and mass transit projects throughout California.

George Runner today issued the following statement regarding a 3.5 cent increase in California’s excise tax on gasoline scheduled to take effect July 1, 2013:

“On July 1 Californians will be forced to begin paying the highest gas taxes in the nation. They have a right to be angry and demand explanation from their elected officials.

“I too am upset and frustrated by this tax increase, which stems from a complicated law known as the ‘fuel tax swap.’

“The goal of the fuel tax swap wasn’t good tax policy. Instead, its sole purpose was to allow the Legislature to move more than a billion dollars in gas tax revenues into the state’s General Fund.

“I voted against the fuel tax swap. I also voted against the 3.5 cent rate increase that takes effect July 1.

“Although the Board of Equalization must implement the law as written, a certain amount of discretion comes into play. Most of the July 1 increase is based on uncertain projections of future gas prices.

“I don’t think we should be in the business of raising taxes based on guesswork.”

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