Tom Warne Report, 26 March 2012
California’s State Board of Equalization leader, George Runner, is calling on state lawmakers to limit state taxes on rising fuel prices. State residents are currently paying over $4 per gallon and Runner said his goal is to help struggling families.
“While taxes aren’t the only reason for rising fuel prices, they are part of the problem,” Runner said. “As fuel prices rise, California consumers are paying more tax for less gas. These sky-high fuel prices contain hidden taxes that drive up the price we pay at the pump. Each and every time fuel prices rise, our taxes go up too. It’s time we draw the line on any further increases.”
Hawaii is the only state with higher fuel prices than California, according to the Energy Information Administration. California ranks second in the nation with its consumer taxes, with taxes and fees averaging 67 cents per gallon on gasoline and 76 cents on diesel. Runner says that because the sales tax is calculated on the total price of fuel including excise taxes, it results in a double taxation or what he calls “a tax on a tax.” California’s 2010 Legislature enacted new legislation that required the State Board of Equalization to lower the sales tax on gasoline and raise the excise tax by a corresponding amount. Runner’s proposal would cap the excise tax on fuel at 35.7 cents and limit sales tax to the first $4 of gasoline.
California’s system of taxation is complicated. It evolved over time, and tinkering with it is fraught with danger. On the surface capping the excise tax and sales tax on motor fuel may sound like a good idea. The average price of fuel in California on March 19th was $4.329 per gallon. Fuel prices went up 26 cents in one week in late February. Clearly, fuel price volatility has a greater impact on what people pay than a nominal reduction in the fuel or sales taxes incident to price changes. Perhaps a greater lesson may be found in the “temporary” payroll tax reduction that occurred nationally last year. I think we can guarantee this “temporary” payroll tax reduction will never be removed…further accelerating the demise of the Social Security Trust Fund. In like manner any temporary reduction of transportation related taxes will likely result in a permanent reduction and impact to state transportation funds. TW