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Amid Low Gas Prices, California Lowers the Tax Rate

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

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.)

Caroline Cournoyer is GOVERNING's senior web editor.
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