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California levies massive fuel taxes to pay for roads

Californians are about to see huge increases in the fuel taxes they pay at the pump. SB-1, California’s Road Repair and Accountability Act of 2017, was signed into law by Gov. Jerry Brown (D) in April and will begin taking effect this Wednesday with a 12 cent jump in the gasoline base excise tax and a 20 cent spike in the diesel fuel base excise tax. The diesel fuel sales tax rate will more than triple, from 1.75% to 5.75%.

Wednesday’s tax hike on regular gasoline will see further increases on July 1, 2019, when the price-based excise tax will be reset at 17.3 cents a gallon, up from its current rate of 9.8 cents a gallon.

After the law goes completely into effect, California will be charging drivers 47.3 cents of taxes on every gallon of gasoline they purchase and 36 cents of taxes on every gallon of diesel fuel, plus the greatly enlarged sales tax on diesel. California will overtake Connecticut, Michigan, Hawaii, and New York in the race for highest fuel taxes; only Pennsylvania and Washington charge more. 

Gov. Brown expects the new taxes to raise $54B to be re-invested in California’s roads, bridges, and mass transit systems over the next ten years. Caltrans wants to rebuild 17,000 miles of pavement, 500 bridges, and 55,000 culverts in that period. By the end of 2027, the state hopes that 98% of state highway pavement and 90% of culverts will be in ‘good’ or ‘fair’ condition. 

California last increased its fuel taxes to fund transportation projects in 1994. Those taxes did not contain inflation-adjusted increases, and, ironically, California’s stringent fuel-efficiency regulations in the intervening decades have starved its gasoline tax revenues. In 2017, road repair in California received less than half of the funding it did in 1994. The new taxes will only cover a fraction of the estimated $136B backlog of needed repairs on state highways and local roads. 

So far in 2017, seven states—California, Indiana, Montana, South Carolina, Oregon, Tennessee and West Virginia—have passed legislation to increase fuel taxes. Michigan raised gas taxes to pay for road repairs in December of 2016. State transportation departments and advocates of infrastructure investment consider these hikes last-ditch responses to longstanding inaction at the federal level.

State Assemblyman Travis Allen (R-Huntington Beach), a fiery populist who jumped into California’s 2018 gubernatorial campaign earlier this year, led the rear-guard Republican opposition to SB-1. On Saturday, Allen tweeted, “‘Anger. Confusion. Shock’ @JerryBrownGov’s massive gas tax costs Californians $2.50 every fill up starting Wednesday.” Republicans are in the process of gathering the required number of voter signatures to put at least one gas tax repeal initiative on the November ballot next year. Except for Sen. Anthony Cannella (R-Ceres), the GOP unanimously voted against SB-1 earlier this year.

Meanwhile, groups like the Los Angeles County Business Federation and the Orange County Business Council—the ‘chamber of commerce’ wing of the California GOP—are raising money to defeat the gas tax repeal initiatives. The Desert Sun, the newspaper of Palm Springs and the Coachella Valley, characterized the GOP rift as another front in the party’s civil war: “anti-tax populists vs. the business establishment.”

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John Paul Hampstead

John Paul conducts research on multimodal freight markets and holds a Ph.D. in English literature from the University of Michigan. Prior to building a research team at FreightWaves, JP spent two years on the editorial side covering trucking markets, freight brokerage, and M&A.