Plan to Lower Gas Tax Floated

Democrats in the state Assembly proposed Tuesday to offer drivers some relief at the pump by cutting gas taxes 11 cents a gallon and increasing the sales tax on everything else.

Under the plan, the sales tax would go up a quarter of a cent, raising roughly as much revenue as the gas tax would cut, to pay for transportation projects. In addition to the tax swap, the state would sell a $10-billion bond issue that would be used to jump-start such projects, long stalled amid the state’s budget crisis.

The gas tax would creep back up, by a total of 4 cents, over the next decade to repay the 20-year bonds.

Though the plan would ease gasoline prices now reaching an all-time high, it also would force nondrivers to bear more of the cost of building and maintaining California’s roads. If the plan is approved, the gas-tax cut could take effect by July 1 as summer vacationers take to the roads.

“This comes at a time when gas prices are hitting record numbers,” Assembly Speaker Fabian Nunez (D-Los Angeles) said after unveiling the plan alongside a Sacramento freeway onramp. “Our proposal will immediately reduce the price of gasoline at the pump by 11 cents.”

Gas prices last week hit $2.464 a gallon for self-serve regular, according to the Energy Department. And analysts project that prices will continue to rise as the summer travel season approaches.

Republicans quickly assailed the Democrats’ proposal as a shell game and a backdoor sales-tax hike. They asked why the state would raise sales taxes across the board to pay for freeways and local roads, instead of continuing to tax the drivers who use them.

“This looks to me like, ‘Let’s put a new tax under a cup, move three or four cups around and then see what comes out,’ ” said Assembly Transportation Committee Vice Chairman John Benoit (R-Palm Desert). “The gas taxes people pay at the pump should be what goes to roads.”

Republicans questioned Democrats’ assertion that the sales-tax hike would be temporary -- eliminated by 2011, when a scheduled federal estate-tax increase will provide new money for the state. Federal taxes could be cut by then, or the state could need that revenue for something else.

“This proposal is just a Rube Goldberg mechanism for raising taxes,” said Assemblyman Keith Richman (R-Northridge), a moderate who has aggressively pushed for more transportation spending. “It includes lowering some gas taxes, then raising them and then raising the state general sales tax. Besides that, the measure calls for an additional $10 billion of state borrowing, which we just can’t afford.”

The Democrats’ initiative caught business groups, which have been pushing lawmakers to reinvest money in California’s crumbling roadways but are also wary of new taxes, by surprise.

“It appears to involve some fairly intricate financial shifts,” said Bill Hauck, president of the California Business Roundtable. “When you propose financing of this kind, it involves a whole set of assumptions and future forecasts which need to be examined.”

Even so, Hauck said, he applauds the focus on transportation: “This strikes me as recognition this is a problem that needs addressing.”

The tax plan is part of a campaign aimed at middle-class voters. Democrats vowed this year to focus their state budget agenda on such issues as traffic congestion, sprawl and the escalating price of housing in California.

“We need a robust and serious and stable source of transportation funding,” said Assembly Transportation Committee Chairwoman Jenny Oropeza (D-Long Beach).

Over the last several years, the state has diverted as much as $1.3 billion of gas-tax money each year from transportation projects and used it to help close state budget shortfalls.

The lack of money for road projects led the nonpartisan legislative analyst’s office to warn in 2003 that roads and freeways were in such bad shape they were causing harm to the economy. The analyst concluded that taxpayers were spending more than $4.7 billion a year in wasted fuel and time as a result of traffic congestion, and noted that streets in Los Angeles and San Jose were ranked among the nation’s worst.

A typical Los Angeles driver, according to the analyst’s report, already pays more than $700 in vehicle repairs each year because local roads are in such poor condition.

Gov. Arnold Schwarzenegger is again proposing to raid Proposition 42 gas-tax money that voters earmarked for transportation projects to balance the upcoming budget. But his budget plan also calls for a new constitutional amendment that would prevent the state from ever again touching Proposition 42 money, beginning in fiscal 2006-07.

Democrats have refused to negotiate with the governor on his proposal, because it was tied to automatic spending controls that could result in deep reductions in most other state programs, including education and healthcare.

Administration spokesman Vince Sollitto was careful to point that out when asked about the Democratic plan.

“The administration will give this proposal the serious review and open-minded consideration it deserves,” he said, “which is more than the Legislature has done with Gov. Arnold Schwarzenegger’s reform proposals.”