According to our poll of readers at the Los Angeles Business Journal, rising gasoline prices are “a big concern” to 96 percent of the respondents. Granted, our poll is highly unscientific – we just ask readers to tell us what they think – but 96 percent may be the most lopsided response we’ve ever gotten to one of our weekly questions.
Maybe it’s because Californians are hurt more than drivers in other places when prices are on the rise. Have you noticed that gasoline prices are not only higher here than every other state except Hawaii, but when pump prices are on the rise generally, they go up even higher here than elsewhere? If prices go up 50 cents a gallon in Arizona, they may go up 53 cents here.
That’s mainly because of the way the state taxes gas.
George Runner, a member of the state Board of Equalization, last week floated a pretty fair idea to stop that from happening.
He said the state should cap its excise tax on gasoline, which is currently 35.7 cents a gallon but set to go to 36 cents on July 1. More significantly, he proposes that the state suspend sales tax on gas above $4 a gallon.
The sales tax is pernicious to California’s motorists as gasoline prices rise. For example, let’s say there’s a 5 percent sales tax. When gas costs $1 a gallon, the sales tax is 5 cents a gallon. But when gas rises to $4 a gallon, that means the tax is 20 cents. As prices rise, you give the state more money to buy the same amount. And it is the sales tax that makes California gasoline prices go up further than other states when prices are on the rise.
The result is a windfall for the state. According to Runner, the state collected $61 million more in fuel taxes in the second quarter of last year than in the same quarter a year earlier. That’s while fuel consumption fell by 127 million gallons.
What’s particularly galling is that the sales tax is applied to the price of gasoline after the 18.4-cents-a-gallon federal excise tax and the bigger state excise taxes are added. In other words, every time you buy gasoline, you pay a tax on the tax.
On the good side, the state sales tax on gasoline, now 2.25 percent, is well down from 6.25 percent a few years ago. On the bad side, the per-gallon excise tax has risen to offset that. In the end, California’s taxes and fees average 67 cents a gallon, tied with Connecticut as the second highest in the country. If you buy 15 gallons at a time, you pay $10 in taxes and fees every time you fill up.
Runner, who is a former state senator and one-time mayor of Lancaster, could be dinged for coming out with a proposal that’s too modest. Perhaps it would save consumers a couple of pennies a gallon. But at least it would break of the cycle in which the state squeezes ever-increasing amounts of money from motorists as gasoline prices go up.
And the state could not argue that Runner’s plan would result in lower than budgeted revenue; the state budget was projected assuming pump prices below $4 a gallon. The state would continue to get more money from motorists than it expected even if Runner’s proposal were enacted today. Even if it were made retroactive.
Californians pay more than they should. Of course, those high prices hurt low-income people disproportionately, since they are more likely to drive longer distances to work, and do so in older, less fuel-efficient cars and trucks.
Runner’s plan at least would do a little to help keep California’s prices from going up faster than other states.
Charles Crumpley is editor of the Business Journal. He can be reached at firstname.lastname@example.org.