Gas tax: What Californians actually pay on each gallon of gas

The state gas tax may have risen 12 cents last year — the amount targeted for repeal this November — but that’s far from all the taxes drivers pay on each gallon of gasoline.

The actual tax on gas is closer to 73.82 cents per gallon, depending on where you fill up and the price of gas at the time. But the history of the gas tax, and various other taxes added to the cost of fuel, reveal an ongoing debate politicians and voters have been grappling with ever since the state’s gas tax was first instituted nearly a century ago.

Are roads a utility, like water and electricity, with users paying for what they consume? Or a public good, like schools, where every taxpayer chips in even if they don’t use them? It all boils down to who benefits and who should pay, said John Harvey, a professor of civil and environmental engineering at UC Davis.

“That is the major, ongoing question,” he said. “Then, the thing that came in later was additional parts of that equation: What are the impacts of roads, not just the benefits? And who should shoulder those impacts?”

As voters head to the polls to consider Prop 6, which would repeal the 12-cent gas tax increase approved last year, along with a 20-cent increase in diesel taxes and additional vehicle registration fees that are expected to raise $5.4 billion annually for transportation projects, they’ll be joining the gas tax debate, confronting questions like those above, and many more.

Should road users subsidize transit riders? Or should the gas tax only go to highways, as supporters of the gas tax repeal suggest? And how did our taxes get so high, anyway?

To help get you oriented, we’ll break the taxes on gas down for you:

State gas tax: 30 cents per gallon

The state first began collecting a gas tax in 1923 at two cents per gallon as California was grappling with how to pay for maintenance of its new highway system. In 1909, the state financed a 3,000-mile, 34-route road network with an $18 million bond that had no real funding source, other than the general fund, identified to repay it, said Martin Wachs, professor emeritus of urban planning at UCLA.

Conceived as a user fee, the tax was meant to approximate a toll to cover the costs of ongoing maintenance. But since building and staffing toll booths cost more than the money the tolls would generate, an excise tax — in this case, a flat fee — was instituted as an easier way to collect the same amount of money while only charging people benefiting directly from the roads, Wachs said.

“The idea was not that you would be taxing gasoline,” Wachs said, “but you would be charging drivers for their use of the roads.”

It didn’t take long, though, for voters to protect that money from being used for other purposes. Voters in 1937 approved a 3-cent tax on diesel, along with an amendment to the state constitution restricting the use of fuel taxes to the construction, improvement, repair and maintenance of highways and roads, or the purchase of rights-of-way to build new roads and highways. Later, in 1973, voters agreed gas tax money could also be used to help pay for public transit and to lessen the environmental impact of driving.

After collection and administration fees, half of the original fuel taxes went to highways, with the other half going to county thoroughfares, similar to how the funds are distributed today. Before last year, the last time the gas tax was raised was in 1989, when voters doubled it from 9 cents per gallon to 18 cents. Senate Bill 1 (SB1), the 2017 law that increased the gas tax and would be repealed under Prop 6, raised the current tax to 30 cents per gallon.

Federal gas tax: 18.4 cents per gallon

The federal tax on gasoline was first enacted in 1932 at one cent per gallon. It was last raised in 1993 to 18.4 cents per gallon. It’s also considered a “user fee,” similar to California’s gas tax, though the federal government is increasingly relying on general fund money to pay for transportation projects, said Gian-Claudia Sciara, an associate professor at the University of Texas and former professor at UC Davis’ Institute for Transportation Studies.

State sales tax on gasoline: 2.25 percent (or, roughly 8.1 cents for a $3.60-gallon of gas)

When the state’s general sales tax was first enacted, it didn’t include gasoline. That’s because road users were already paying a “fee” in the form of the gas tax, Wachs explained. That thinking changed in 1971, when the legislature approved the Transportation Development Act and included gasoline in the state sales tax, with some of those funds dedicated to public transportation for the first time.

California had just undergone a major expansion of its freeways, but they were already filling with more cars than they could handle, Harvey said. The state couldn’t simply build its way out of growing congestion, and smog was getting worse. Much worse, Wachs said.

“The concept … was to reduce auto dependency and reduce smog by getting more people on transit,” he said.

The 7.25 percent sales tax on gasoline was eventually repealed in 2010 under a complicated funding scheme called the “gas tax swap” that eliminated all but 2.25 percent of the sales tax. Only .25 percent of the slashed sales tax on gasoline goes to transportation. The rest goes to public safety, local health and social service programs, and city and county operations.

Variable state gas tax: 11.7 cents per gallon In a ruling that reaffirmed the idea that transportation revenues should be dedicated for specific uses, the courts in 2009 decreed the state could no longer use the sales tax on gasoline — which was supposed to be going to public transit — to pay off bonds related to highway and road construction. So in 2010, Gov. Arnold Schwarzenegger’s administration devised the gas tax swap to bypass that ruling, Sciara said. It eliminated most of the sales tax on gasoline and replaced it with a new tax, also a flat fee. Unlike the gas tax, which charges the same per-gallon fee no matter the price, this new tax varies every year. It’s designed to approximate the portion of the sales tax that was lost when the courts ruled it was being used inappropriately. Money generated from the variable tax is restricted to roads, highways and public transit in the same way as the gas tax, but it allowed the state to use the new variable tax funds to pay for transportation-related debt. Voters pushed back against what was seen as another diversion of money needed for new transportation projects. So now, the state uses truck weight fees to pay off transportation bonds. But the new variable tax created significant unintended consequences for cities, counties and transit agencies relying on those funds. Because it swings so much from year to year, local agencies never know how much they would receive, which makes planning years-long projects incredibly challenging, Wachs said. SB1 would eliminate the swap and, beginning July 2019, set the “variable” tax at 17.3 cents, the rate it was when the swap was first enacted. Local sales taxes: 3.62 cents per gallon on average Beginning in the late 1970s, but with increasing fervor in the 1980s, counties and other transit agencies increasingly took it upon themselves to finance transportation projects in their own communities, Wachs said. It’s a trend that continues to this day. Related Articles Bay Area: What happens if the gas tax is repealed?

Gas taxes: Where does your money actually go?

Meet the Valley Link: Your ticket out of mega-commuting hell The most popular funding method is a local sales tax. In the 2016-17 fiscal year, local sources of funding, which the state’s Legislative Analyst’s Office defines as sales taxes, transit fares, development impact fees and property taxes, provided more than half of all transportation funding in California. The American Petroleum Institute estimates the average local tax for transportation projects in California amount to roughly 3.62 cents. That amount gets charged on all goods that aren’t exempt from sales taxes, not just gasoline, but the revenue generated from local sales taxes on gasoline go directly to transportation projects in their communities.

Underground storage tank fee: 2 cents per gallon

The US Congress in 1986 established the Underground Storage Tank Trust Fund to pay for damage caused by leaking or abandoned petroleum storage tanks, said Matt Rocco, a spokesman for Caltrans. The trust fund reimburses small business owners, residents and local regulatory agencies for environmental cleanup, he said.

Got questions about the gas tax? Email them to ebaldassari@bayareanewsgroup.com

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