Board Approves Gas Tax Increase of 1.9 Cents Per Gallon

The board voted 4-0 to approve the BOE staff's recommendation to increase the state gasoline tax to 29.7 cents per gallon – an increase of 1.9 cents per gallon over the current rate – effective July 1.

Voting in support were Ms. Harkey, Ms. Ma, BOE Member Jerome Horton and Deputy State Controller Yvette Stowers, representing Controller Betty Yee. Mr. Runner was not present when the vote was taken.

The board also approved: a diesel tax rate of 16 cents per gallon, which is the same as the current rate; a three-cent decrease in the per-gallon rate for diesel fuel for interstate users; and prepayment rates for the sales tax on motor vehicle fuel (5 cents per gallon, the same as the current rate), diesel fuel (18 cents per gallon, a one-cent increase) and jet fuel (8.5 cents per gallon, an increase of 1.5 cents).

The rates were proposed by the governor's Department of Finance. In response to questions from Ms. Harkey, staff said the BOE ran its own numbers and came up with the same figure that the Brown administration came up with.

The BOE's duty to annually adjust the gas and diesel tax rates stems from 2010 legislation known as the "fuel tax swap," where the sales tax on gas was reduced and the gas tax was increased to allow funds to be used to help mitigate pressure on the general fund. The swap was intended to be revenue-neutral, with the increase in gas tax offsetting the sales tax reduction. The BOE is required each year to set a gas tax rate that reflects what would have been generated had the sales tax not been reduced, and part of this estimate involves projecting what the price of gas will be in the future.

Ms. Ma noted that the governor and Senator Jim Beall have proposed legislation that would, among other things, do away with the annual fuel tax swap.

"Next year, it may not come to us anymore," Ms. Ma commented.

"I'm sure it will involve an increase," Ms. Harkey responded.

February 24, 2017

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