California lowers gas tax

Greg Nash

California is lowering the amount of money drivers in the state will have to pay at the pump to help pay for transportation projects, The Associated Press reports

The California Board of Equalization has voted to lower the state’s excise tax on gas purchases from 30 cents per gallon to 27.8, according to the report. The proposal would cut the state's transportation fund by $328 million, the AP said 

Drivers in California are charged an additional 10.62 cents per gallon in other taxes on their fuel purchases, according to the American Petroleum Institute (API). 

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California's fuel levy is collected on top of an 18.4 cents per gallon federal gas tax that is charged to all drivers in the nation to fill the federal government’s transportation funding coffers. 

The API says the gas tax decrease will bring the total amount of money that drivers in California are charged at the pump to about 57 cents per gallon. 

California is the latest state to make changes to its own gas taxes in recent years as Congress has resisted a federal hike. Six states implemented hikes on July 1 of last year. 

Transportation advocates had pushed lawmakers to increase the federal gas tax during a debate about a multiyear highway funding bill last year, but lawmakers opted instead to turn to other areas of the federal budget to pay for a five-year, $305 billion highway bill

Supporters of increasing the gas tax point to the willingness of states to raise their own fuel levies as evidence that a national hike would be politically palatable this year, although California officials said they are decreasing their gas tax because they have collected too much money from drivers in recent years, according to the report.

Conservative groups in Washington have made clear that they would consider a federal increase to be a tax hike, however, and Republican lawmakers ruled it out even as they were searching for ways to pay for a new highway bill.

The national gas tax has been the traditional source of transportation funding since the inception of the interstate highway system in the 1950's. The tax has not been increased since 1993, however, and improved fuel efficiency has sapped its purchasing power. 

The federal government typically spends about $50 billion per year on transportation projects, but the gas tax only brings in approximately $34 billion annually at its current rate. 

Lawmakers turned to other areas of the federal budget to close the $16 billion per year gap last year, but transportation advocates have said the federal gas tax will have to eventually be increased or replaced with a more sustainable funding source to keep pace with rising costs for infrastructure projects.

The Congressional Budget Office has projected that it will take about $100 billion, in addition to the annual gas tax receipts, to pay for a six-year transportation funding bill. 

Lawmakers relied on a package of approximately $70 billion of offsets from other areas of the federal budget to help pay for the recently completely highway bill, which lasts until 2021.