It’s official: Gas tax going up

by Jonathan Horn,  |  published on March 4, 2013

gas tax

The tax you pay on a gallon of gas will rise by 3.5 cents in California come July 1.

The state Board of Equalization voted 3-2 on Thursday to increase the excise tax about 10 percent, from 36 cents per gallon to 39.5 cents per gallon.

The increase is partly due to a $157 million shortfall in gas-tax revenue in fiscal 2012, and also a projection of less consumption by California drivers.

The state legislature switched its gas taxation system in 2010 so it could re-appropriate some of the gas tax money from road maintenance to other areas. It reduced the sales tax from 8.25 percent to 2.25 percent, but roughly doubled the excise tax to 35.3 cents. The excise tax has increased multiple times since, but previous hikes were by fractions of cents.

An excise tax is a tax on an individual product purchased, not based on the price. The publicly elected Board of Equalization must set the rate each year by March 1 so that the state generates the same amount of tax revenue it would have had it remained under the previous sales-tax system. Taxable sales of gasoline in California have fallen.

A January study by the American Petroleum Institute listed California’s gas taxes as second highest in the nation behind New York. After the July 1 tax increase, however, the 70.1 cents average tax per gallon will lead the nation.

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