Tax collector wants to freeze state levy on gasoline
SACRAMENTO— An elected state tax collector wants to save strapped California motorists money by freezing the sales tax on gasoline whenever the pump price jumps above $4 a gallon.
The idea, said George Runner, a Republican member of the State Board of Equalization, is to put a few bucks back in consumers’ pockets rather than provide a small windfall to local governments.
Gasoline prices in California averaged $4.33 on Wednesday, according to AAA’s Daily Fuel Gauge Report. Runner said his proposal, expected to be introduced soon in the Legislature, would save consumers $1.4 billion a year if retail gas prices hit $5 a gallon.
“This should be a reasonable issue for us to talk about without being partisan,” Runner said. “We should try to figure out how to help motorists and taxpayers who are getting walloped at the pump.”
Passing a bill won’t be easy, Runner acknowledged. It would cut revenue for struggling cities, counties and other local governments. They would lobby hard to keep any proposal from winning bipartisan two-third majorities of the members of the Assembly and Senate and the support of Gov. Jerry Brown.
Brown and the Democrats who control the statehouse are struggling to fill a projected $9.2-billion deficit next year, and a host of cities are facing ever-deeper cuts as they try to balance their own budgets.
Sales tax revenue on gasoline for cities and counties rose 22.5% for the fiscal year that ended Sept. 30. And a change in the tax formula two years ago is ensuring that the state per-gallon gasoline excise tax revenue stays even with fuel-price inflation.
“We’re not interested in undermining funding for local governments,” said Robin Swanson, a spokeswoman for Assembly SpeakerJohn A. Perez(D-Los Angeles).
Gas sales tax dollars will help but “are not a panacea for the deep problems that cities are working through right now,” said Michael Coleman, a financial analyst with the League of California Cities.
California now has the second-highest level of gas taxes in the nation with an average of 67 cents a gallon, just below New York’s 67.4 cents a gallon, according to the American Petroleum Institute.
For every gallon of gasoline they buy, California motorists pay a federal excise tax of 18.4 cents and a state excise tax that is 35.7 cents now but fluctuates annually. The local sales taxes average 3.1% on the cost of gas and on the excise taxes, essentially a tax on taxes. That amounts to more than $10 in taxes for a 15-gallon tank of gasoline.
Those rates, according to the Board of Equalization, gave the state $5.2 billion for the fiscal year that ended Sept. 30 and local governments a total of $1.5 billion.
Most of the local gas-tax pot is earmarked by various laws for special purposes, including public safety, health, social services and transportation. But a little more than a third of the proceeds goes to the cities and counties to spend as they like.
The rising proceeds from gas taxes aren’t a game changer for Los Angeles as it copes with a fiscal crisis, Mayor Antonio Villaraigosa said.
“It’s not enough of a revenue source that we’re focused on it much,” the mayor said.
The increased income “is like nickels and dimes to the cities,” said Lenny Goldberg, director of the liberal-leaning California Tax Reform Assn. At best, he said, the added funds help compensate the city for higher fuel costs for police cars, fire engines and garbage trucks.
The city’s share of gasoline sales tax rose nearly 17.8% to $12.6 million for the three months that ended Sept. 30 from $10.7 million in the year-earlier quarter. That accounted for 13.3% of the city’s revenue from all sales taxes, according to the Los Angeles city administrative officer. Sales taxes in general account for 4.5% of the city’s revenue.
The slow trend of increased gas tax revenue is expected to continue in upcoming city reports for the last three months of the year and the first quarter this year, said Rexford Olliff, a City Hall financial specialist.
“Growth can be reasonably expected until gasoline prices stabilize or decline,” Olliff said.
The growing tax revenue comes in spite of a steady drop in demand as prices have soared. Consumption fell nearly 3% for the year that ended Sept. 30, according to the California Board of Equalization. Over a six-year period, demand has fallen 10%.
To compensate for potential loss of income, which is dedicated to transportation projects, the Legislature last year applied an inflation index to a portion of the excise tax. It ordered tax collectors to recalculate the levy annually.
Runner’s idea is good but doesn’t go far enough, said Jon Coupal, president of the conservative Howard Jarvis Taxpayers Assn., named after an author of the Proposition 13 initiative that limited property taxes.
Instead of coming up with ways to keep all gasoline taxes high, lawmakers should declare a tax holiday for the sales tax on gasoline, Coupal said.
“We have always found it extraordinarily offensive that there is a state tax applied to a federal tax and another state tax,” Coupal said. “If you go up to anybody and tell them that, they are incensed.”
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