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Gas Tax Is State Money Pot | Oil Watchdog

Press Release

Gas Tax Is State Money Pot


Tue, Mar 25, 2008 at 12:58 pm

    Gas Tax Is State Money Pot

    3-26-08 by dugan



    Most of U.S. price inflation is being driven by oil, and no place is it more evident or harmful than at the pump. Especially in California, where regular is stuck at over $3.60 a gallon. Less evident is how the California gas tax puts government on the side of Big Oil when prices rise. As the San Francisco Chronicle writes today, the state budget may be deep in the red, but rising gasoline prices have spiked collections of the gasoline sales tax, from $2.1 billion in 2003 to as much as $5 billion this year.

    Unfortunately, the only argument in Sacramento is over whether the money, which is supposed to go to transportation projects, should be grabbed to reduce the deficit. The question that still needs answering, though, is why the state should profit so grandly from corporate greed and hedge fund speculation. A 2005 study by Consumer Watchdog asked this question, and pointed out that those most hurt by the escalating gasoline tax are the working poor, since the minimum wage rises at a snail’s pace while gasoline costs rocket upward. The rising tax receipts also muffle legislators’ enthusiasm for controlling refiners’ profits.

    California is in a small minority of states that impose a percentage sales tax on gasoline, currently averaging about 8%. Not so terrible at $1.50 a gallon, but at $4.00 a gallon, the sales tax is over 30 cents, dwarfing the 18.4 cents/gallon for federal excise taxes; and 18 cents/gallon for state excise taxes. The excise taxes rise only when legislators enact a new rate, so such taxes are stable and predictable. Some thought has to go into raising them.

    There is a strain of argument among environmentalists that extremely high gasoline taxes are the key to conservation, to reducing greenhouse emissions, and so on. They point to Europe, where gasoline may cost more than $7.50, with up to $5 going to taxes. But in Europe, those taxes have already bought a comprehensive, highly subsidized public transportation system and shored up other social benefits. Not driving is little cause for pain.

    In California, as in much of the U.S., workers making  a few dollars above minimum wage have few options to driving. The state’s roads are mess, Los Angeles is pothole city, and buses are slow and crammed. Yet while the Legislature should be changing the tax from a percentage to a lower cents per gallon, lawmakers are  salivating at grabbing the gasoline tax for everything except public transportation. Shame on them. 

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