Get ready for likely gas price increase when California taxes go up

A motorcyclist pumps gas at a Chevron station on March 1 in San Francisco. The California Board of Equalization voted to increase a statewide excise tax on gasoline by 3.5 cents per gallon, to 39.5 cents.
(Justin Sullivan / Getty Images)

It’s probably the last thing that California motorists want to hear: the state’s excise tax on gasoline will rise by 3.5 cents a gallon on July 1.

The increase will take the state’s excise tax to up to 39.5 cents a gallon for every gallon of gasoline sold in California.

It’s also a change that will put upward pressure on retail gasoline prices at the pump at a time when California already pays more for gasoline than almost every state in the nation.


Today, for example, the average cost of a gallon of gasoline in California is $4.222, according to the AAA Fuel Gauge Report.

That’s 47.6 cents a gallon higher than what the average American is paying for the same amount of fuel. Among states, only Hawaii has a higher average price for gasoline, at $4.396 a gallon.

But it impossible to predict whether all of that 3.5 cent rise will be passed on to consumers at the gas pump. The tax is applied at something called the terminal rack, which is one step along the path from the refineries to the gas pumps where drivers buy their fuel.

Gasoline distributors or gas station operators could choose to pass all of the increase on to consumers, or just some of it.

The five-member California Board of Equalization is an elected body whose members serve four-year terms. They are rarely in the news.

The board voted 3 to 2 Thursday for the excise tax rise. It could have chosen a smaller amount.

George Runner, a former state senator who represents District 2 on the Equalization Board, was one who would have preferred a smaller hit.

Runner said, “I cannot support a more than half a billion dollar tax increase on struggling Californians who are already experiencing significant pain at the pump.”

But the majority felt 3.5 cents was necessary.

Because of a complicated 2010 law, the board is required to make up for the 5% in statewide sales tax revenue that was exempted when that law went into effect.

California’s gasoline tax is just 2.25%. Last year, the board added just 0.3 cents to the excise tax, which brought it to 36 cents a gallon.

“The legislature mandated that we equalize the sales and excise taxes to avoid a net increase in taxes,” said board Chairman Jerome E. Horton. “We could protest the legislation and not make the rate adjustment, however we would be violating law and arguably exposing taxpayers to even higher taxes in the future.”


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