California fuel taxes are headed up, way up

By Keith Goble, Land Line state legislative editor | 4/7/2017

The California Legislature voted on Thursday, April 6, to approve a 10-year, $52 billion transportation funding deal. Professional drivers are pegged as major contributors for the plan via a 20-cent diesel tax increase.

By a one-vote margin the Senate voted last night to approve the bill. The 27-11 vote cleared the two-thirds supermajority necessary to advance.

Assembly lawmakers followed suit shortly thereafter. The chamber needed 54 favorable votes to secure passage to the governor’s desk. The final tally was 54-26 to adopt.

Democratic Gov. Jerry Brown and leading lawmakers of his party unveiled the funding plan in the past week. The deal is estimated to raise $5.2 billion annually for state and local roads, trade corridors, and public transit.

The funding package includes a mix of higher taxes and fees. It is described as a “first step” toward making roadways safer and providing a boost to the state’s economy.

Assemblyman Rudy Salas Jr. of Bakersfield was the lone Democrat to vote against the bill. He cited concerns about additional tax burdens on his constituents.

“The families I represent drive too far to jobs that pay too little.”

Assemblyman Mike Gipson, D-Carson, acknowledged the bill is not perfect. However, he said it ensures the state is moving forward.

“Senate Bill 1 passes the smog test,” Gipson commented following the vote.

Republicans at the statehouse, including Sen. Ted Gaines of El Dorado, said funds already available to the state were a better option.

“And how are the people supposed to believe that this money will actually go to transportation? This state is already diverting a billion dollars in weight fees away from our roads every year.”

SB1 would raise nearly $3.8 billion annually mostly via increases in the gas and diesel tax rates.

The state’s current tax rates are about 38 cents per gallon, according to the American Petroleum Institute. The excise components making up the tax rates are 27.8 cents for gas and 16 cents for diesel.

The bill from Sen Jim Beall, D-San Jose, would increase the excise rate on gas by 12 cents to raise $24.4 billion. The excise rate on diesel would be increased by 20 cents to raise $7.3 billion. The diesel money would be designated for freight, trade corridors and goods movement.

In exchange for collecting more in excise taxes, California’s current collection method for fuel taxes would be abandoned. No longer would the state Board of Equalization annually adjust the fuel tax rates. Instead, price-based tax rates would be restored.

In addition, the 1.75 percent sales tax applied to diesel purchases would be increased by 4 percent to 5.75 percent. The increase is estimated to raise $3.5 billion.

Revenue from the diesel sales tax increase, however, would not directly benefit trucking. The money would be deposited into an account for transit and intercity rail projects.

The Owner-Operator Independent Drivers Association supports efforts to raise revenue for transportation work in the state. However, the group opposes any plan that calls for truckers to foot more of the responsibility to help bail the state out of its funding hole.

Additional components in the funding plan would increase annual vehicle registration fees up to $175 and apply an annual $100 fee for zero-emission vehicles. The fees would raise $1.3 billion.

All tax and fee rates would be indexed to inflation to allow for increases in future years.

In an effort to appease truckers, another provision in the bill would restrict future regulations on emissions related to commercial vehicles.

Critics say that exempting trucks from clean air rules has no place in a package to fix roads and improve transit.

Beall said earlier in the week at a hearing that the provision would “do no harm.” He said it is merely intended to help an industry that would be heavily taxed.

Also included in the bill is reference to SCA2/ACA5 – a proposed constitutional amendment to be included on the June 2018 ballot. Voters would decide whether to ensure all revenue is spent for transportation purposes.

The Legislature approved the constitutional amendment question after adding language to include truck weight fees in the protection.

Since 2011, weight fees have been diverted from roads to the state’s general fund to pay down transportation-related general obligation bonds. The fees collected top out at $2,271 per truck.

To view other legislative activities of interest for California, click here.

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