Amid Low Gas Prices, California Lowers the Tax Rate

by | February 24, 2016

By Mark Glover

The state Board of Equalization on Tuesday approved lowering the statewide excise tax rate on gasoline by 2.2 cents.

The 3-2 vote for approval at the BOE meeting in Culver City means the tax will decrease from 30 cents to 27.8 cents per gallon effective July 1 and remain there through June 30, 2017.

It marked the third consecutive year that BOE lowered the rate.

Under guidelines of a complicated gas tax formula signed in 2010 by Gov. Arnold Schwarzenegger, BOE annually adjusts the state's gasoline excise tax rate by March 1 each year.

Six years ago, state leaders adopted the "fuel tax swap" formula to help bridge a budget deficit. The excise tax rate is calculated in a way that has motorists pay the same amount in overall taxes at the pump that they would have paid otherwise.

However, a couple of factors could disrupt the historical norm.

For one, BOE recently reported that gasoline consumption in California rose 2.4 percent during the 2014-15 fiscal year, the largest annual increase since the 2003-04 fiscal year and a likely byproduct of the Golden State's improving economy.

Secondly, Golden State gasoline prices have been unusually low of late, which analysts have attributed to adequate fuel supplies and low crude-oil prices.

On Tuesday, AAA said the average price of unleaded regular gas in California was $2.31 a gallon, down 37 cents from last month and 64 cents below the year-ago level. In Sacramento, AAA said regular was going for $2.10 a gallon on average. That's 32 cents below last month's average and a decrease of 68 cents from a year ago.

The 2.25 percent gas sales tax funds local government programs; the state excise tax funds statewide highway and mass-transit projects.

(c)2016 The Sacramento Bee (Sacramento, Calif.)