BILL ANALYSIS �
SENATE TRANSPORTATION & HOUSING COMMITTEE BILL NO: SB 791
SENATOR MARK DESAULNIER, CHAIRMAN AUTHOR: wyland
VERSION: 4/4/13
Analysis by: Carrie Cornwell FISCAL: yes
Hearing date: April 30, 2013
SUBJECT:
Gasoline excise tax: rate adjustments
DESCRIPTION:
This bill requires that increases in the gasoline excise tax
attributable to price increases would require a two-thirds vote
of each house of the Legislature, but decreases would occur as
an administrative action.
ANALYSIS:
The state imposes a sales tax of 7.25 percent on taxable goods,
of which the state portion is 5 percent and the local portion is
2.25 percent. In addition, local jurisdictions impose their own
optional, voter-approved sales taxes, which vary from
jurisdiction to jurisdiction, but on average equal 0.86 percent.
State gasoline taxes
Existing law imposes an 18-cent per gallon excise tax on each
gallon of gasoline sold in the state of California. State law,
known as the "gas tax swap," eliminated the sales tax on
gasoline and instead imposes an additional excise tax that the
Board of Equalization (BOE) adjusts annually to equal the amount
of sales tax that the state would charge on gasoline sales if
they were still subject to the state portion of the sales tax.
Currently, the total amount of excise tax one pays on a gallon
of gasoline is 36 cents per gallon, and on July 1 of this year
it will be 39.5 cents.
This bill :
1.Deletes the duty of BOE to adjust annually the excise tax on
gasoline.
SB 791 (WYLAND) Page 2
2.Requires instead that by March 1 each year the Department of
Finance calculate the gasoline excise tax rate that would be
required to equal the revenue loss attributable to exempting
gasoline from state sales tax. If this calculated rate is
less than or equal to the current rate, then that rate shall
take effect automatically on July 1. If this calculated rate
exceeds the current rate, then the increased rate will only
take effect if included in a bill passed by two-thirds vote of
both house of the Legislature, otherwise the rate will remain
unchanged
3.Takes effect immediately as a tax levy.
COMMENTS:
1.Purpose . The author notes that while BOE has historically
collected gas tax revenue, the Legislature sets the tax rates
California motorists pay. By allowing BOE to singlehandedly
raise or lower the excise tax on gasoline, the Legislature is
left out on the conversation of an issue that affects almost
every California family. In order to provide for greater
constituent input and transparency into this important
question that affects all areas of our economy, as well as
provide Legislators the opportunity to weigh in on increases
in the excise tax on gasoline, it is only proper that the
Legislature be the final deciders on increases in the excise
tax.
2.Background . Legislators crafted the gas tax swap of 2010 to
remove transportation from the state's General Fund and thus
to assure stable state-level revenue streams for
transportation. To achieve these ends, the gas tax swap
eliminated the state sales tax on gasoline and replaced it
with an increase in the gasoline excise tax designed to
generate an equivalent amount of revenue. To ensure
continuing revenue neutrality in the swap, each year BOE must
adjust the gasoline excise tax such that over time the new
excise tax generates the same revenue as the old sales tax on
gasoline would have generated.
This bill undoes major portions of the 2010 gas tax swap,
specifically deleting the duty of BOE to adjust the rate of
the excise tax - a per gallon charge - to reflect what the
sales tax - a percentage of price charge - would be. Instead
the bill allows a portion of the taxes on gasoline to shrink
SB 791 (WYLAND) Page 3
based on ministerial action but requires at least two-thirds
of the members of each house of the Legislature and the
Governor's signature in order to increase the tax rate to
maintain the historic revenue levels.
3.The will of the voters . These historic revenues began in
2000, when the Legislature dedicated the state sales tax on
gasoline to transportation. California included this
dedication in its constitution when the people approved
Proposition 42 in 2002. The gas tax swap remained true to
Proposition 42 but used a tax available only for
transportation purposes to provide the associated revenue
stream. One could argue that this bill, by undoing the
portion of the gas tax swap that guarantees the associated
revenues stream, undoes the people's intent in Proposition 42,
which was to dedicate additional revenue to transportation.
4.Transportation funding loss . Article XIX of the California
Constitution dedicates excise tax revenues to the research,
planning, construction, improvement, maintenance, and
operation of public streets and highways and mass transit
guideways. Because this bill would make it very difficult to
adjust rates to reflect price increases in gasoline, but rates
would decrease automatically, it would very likely ratchet
transportation revenues protected by Article XIX down over
time. Opponents note that while it may seem appealing at
first to make it more difficult to collect the revenues that
would have accrued to transportation if the sales tax on
gasoline was still in effect, the bill will only aggravate the
funding shortfall that the California Transportation
Commission estimates to be in the billions of dollars
annually.
5.Lower taxes, lower prices ? Decreasing the taxes a seller of a
good pays on that good does not necessarily result in a
decreased retail price to consumers. This is particularly
true for gasoline for which worldwide demand and the world
price of crude oil are the most significant influences on the
price. That is why, despite persistent decreases in demand in
California, the price of gasoline has increased significantly
in recent years. It is unlikely, therefore, that this bill
would result in price decreases, and in any case, the bill
makes no requirement on sellers that they pass any resulting
tax reductions through to consumers.
6.Diesel not in . California historically imposed both sales tax
SB 791 (WYLAND) Page 4
and an 18-cent per gallon excise tax on each gallon of diesel
sold in the state. The gas tax swap legislation reduced this
excise tax to 13 cents per gallon and imposed an additional
1.75 percent sales tax beginning on
July 1, 2010, and then varies this additional sales tax on
diesel as follows:
1.87 percent for the 2011-12 fiscal year;
2.17 percent for the 2012-13 fiscal year;
1.94 percent for the 2013-14 fiscal year.
The gas tax swap requires BOE to adjust the diesel excise tax
annually to ensure that the total amount of tax collected does
not vary from what it would have been if the 18-cent excise
tax and the sales tax rate had been left in place. It is
unclear why this bill changes the adjustment process for
gasoline but not for diesel.
1.Double-referral . The Rules Committee referred this bill to
both the Transportation and Housing Committee and to the
Governance and Finance Committee. Therefore, if this bill
passes this committee, it will be referred to the Committee on
Governance and Finance.
POSITIONS: (Communicated to the committee before noon on
Wednesday, April 24,
2013.)
SUPPORT: None received.
OPPOSED: Associated General Contractors
California State Association of Counties
League of California Cities
Rural County Representatives of California
Transportation California
Urban Counties Caucus