California’s Gas Tax on Its Way Up

Chris Micheli

Attorney and Lobbyist at the Sacramento government relations firm of Aprea & Micheli, Inc.


In the State of California, there are a variety of sources of funding for transportation purposes, including funding for the state highway system and the local streets and roads system. These funding sources include fuel excise taxes, commercial vehicle weight fees, local transactions and use taxes, and federal funds.

Because of legislation earlier this year, SB 1 (Beall), motorists’ gas taxes will be increased to address deferred maintenance on the state highway system and the local streets and roads system. The base excise tax is 18 cents per gallon and then there is a separate, price-based excise tax of 9.8 cents per gallon, which is a total of 27.8 cents a gallon through October 31.

Pursuant to SB 1, there will be an increase of 12 cents per gallon in the motor vehicle fuel (gas) tax with an inflation adjustment, thereby increasing the base excise tax to 30 cents a gallon. And, there is an increase of 20 cents per gallon in the diesel excise tax (which is current 16 cents per gallon), whose total will be 36 cents a gallon, also with an inflation adjustment. Both increases take effect on November 1.

In addition, there is a new transportation improvement fee imposed under the vehicle license fee that varies between $25 and $175 based upon a vehicle’s value, which also has an inflation adjustment. This new fee takes effect on January 1, 2018.

SB 1 also imposes a new $100 annual vehicle registration fee applicable to zero-emission vehicles with a model year of 2020 and later. This fee takes effect on July 1, 2020. All of these tax and fee increases are permanent.

Under SB 1, there will be an annual set aside of $200 million in funding for road maintenance and rehabilitation purposes in counties that have sought and received voter approval of taxes or that have imposed fees that are dedicated solely to transportation improvements. Another $100 million will be available annually for the Active Transportation Program.

In addition, $400 million will be available annually for state highway bridge and culvert maintenance and rehabilitation. $25 million will be made available annually for the freeway service patrol program and another $25 million will be spent for local planning grants.

Some of the funds raised by SB 1 will be used to repay outstanding loans from certain transportation funds in the amount of $706 million. Half of the diesel fuel excise tax revenues will be placed in the Trade Corridor Enhancement Account for corridor-based freight projects that have been nominated by local agencies and the state.

The gas excise tax revenues attributable to boats and off-highway vehicles from the 12 cents per gallon increase are transferred to the State Parks and Recreation Fund to be used for state parks, off-highway vehicle programs, and boating programs.

SB 1 also increases the sales and use tax rate on diesel fuel by an additional 4%, effective November 1. The bill continuously appropriates revenues attributable to the 3.5% rate increase to the Controller for allocation to transportation agencies for public transit purposes under the State Transit Assistance Program. The bill requires the revenues attributable to the remaining 0.5% rate increase to be continuously appropriated to the Transportation Agency for intercity rail and commuter rail purposes.

Chris Micheli is a legislative advocate with the Sacramento governmental relations firm of Aprea & Micheli, Inc.

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