BILL ANALYSIS Ó
SENATE COMMITTEE ON APPROPRIATIONS
Senator Ricardo Lara, Chair
2015 - 2016 Regular Session
SB 16 (Beall) - Transportation funding
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|Version: May 13, 2015 |Policy Vote: T. & H. 6 - 1, |
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|Urgency: Yes |Mandate: No |
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|Hearing Date: May 26, 2015 |Consultant: Robert Ingenito |
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This bill meets the criteria for referral to the Suspense File.
Bill
Summary: SB 16 would impose (1) a $0.10 per gallon excise tax on
gasoline, (2) a $0.12 per gallon excise tax on diesel fuel, and
(3) increase vehicle license fees (VLF) and registration fees
for five years.
Fiscal
Impact:
The Board of Equalization (BOE) estimates that total
revenues (excise and sales tax) from the gasoline and
diesel tax rate increases would lead to revenue gains of
$1.048 billion in 2015-16 and $1.863 billion in 2016-17
(General Fund and special funds).
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The proposed $100 fee on zero emission vehicles would
generate $10.8 million annually (special funds).
The proposed $35 increase in the vehicle registration
fee would generate $1.085 billion annually (special funds).
Assuming no other changes beyond the increased VLF rate
itself, the rate increase to 1.0 percent would generate
$1.216 billion annually when fully phased-in (General Fund,
see Staff Comments).
BOE would incur one-time and ongoing administration
costs to implement the bill, at a minimum in the hundreds
of thousands of dollars annually (special funds)
The Department of Motor Vehicles (DMV) would incur
one-time programming costs of $350,000, and ongoing costs
of under $25,000 with each change in the VLF (special
funds).
The bill would result in $577,000 (special funds)
ongoing in new administration costs to the California
Transportation Commission (CTC).
CalTrans would incur one-time administration costs that
are unknown, but likely to be in the tens of thousands of
dollars minimally.
Background: Current law generally imposes an excise tax on gasoline and
diesel fuel upon (1) the removal (except for aviation gasoline)
at the refinery or terminal rack, (2) entry into the state, and
(3) the sale to an unlicensed person. For 2015-16, the gasoline
excise tax rate is set at $0.30 per gallon, and at $0.13 per
gallon on diesel fuel.
Currently, as part of the "fuel tax swap," retail sales of
gasoline are exempt from the state's General Fund rate. The
fuel tax swap also increased the sales and use tax (SUT) rate on
diesel fuel sales and purchases to offset the loss related to
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the diesel fuel excise tax rate reduction. Current law provides
that the excise tax on gasoline is included in the computation
of locally imposed SUT. The excise tax imposed on diesel fuel
is not subject to SUT.
Upon enactment of the fuel tax swap in March 2010, the gasoline
excise tax rate was increased and included a floor stock tax,
which is a way to equalize the excise tax paid on fuel held in
inventory by a supplier, wholesaler or retailer prior to the
effective date of a tax increase and fuel purchased after the
tax increase. Having a large fuel inventory before a tax rate
increase takes effect can bring about a small windfall to a
seller, who can raise the selling price of the fuel purchased
prior to the increase and attribute the increase in price to the
tax rate increase. Since the diesel fuel excise tax rate was
decreased, there was no need for a floor stock tax.
The vehicle license fee (VLF) is a tax on the ownership of a
registered vehicle in place of taxing vehicles as personal
property. Prior to 1935, vehicles in California were subject to
property tax, but the Legislature decided to create a state-wide
system of vehicle taxation. The taxable value of a vehicle is
established by the purchase price of the vehicle, depreciated
annually according to a statutory schedule. Prior to recent
budget actions, the state collected and allocated the VLF
revenues, minus administrative costs, to cities and counties.
The VLF tax rate is currently 0.65 percent of the value of a
vehicle, but historically (until 2004) has been 2 percent. In
1998, the Legislature cut the VLF rate from 2 percent to 0.65
percent of a vehicle's value. The current vehicle registration
fee is $43 per vehicle.
Proposed Law: This bill would
establish the Road Maintenance and Rehabilitation Program, and
require all revenues from the imposed taxes and fees to be
deposited in the newly created Road Maintenance and
Rehabilitation Account (RMRA). The bill specifies (1) the
gasoline and diesel fuel excise tax rates, (2) vehicle license
and registration fee increases, and (3) allocation of revenues,
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as specified.
I. Gasoline and diesel fuel excise tax rates. The bill would
impose an additional $0.10 per gallon excise tax on gasoline and
$0.12 per gallon on diesel fuel. The bill would also impose a
one-time equivalent rate floor stock tax, as defined.
II. Vehicle license and registration fee increases. The bill
would incrementally increase the VLF to a rate of 1 percent,
over a 5-year period beginning July 1, 2015, with the revenues
above the current 0.65 percent rate to be deposited in the
General Fund and used for transportation general obligation bond
debt service. Additionally, the bill would increase the annual
vehicle registration by $35, and add a new $100 annual vehicle
registration fee applicable to zero-emission motor vehicles.
Additionally, the bill would require Caltrans, by March 1, 2016,
to provide the California Transportation Commission with a plan
to increase the department's efficiency by 30 percent over the
prior three years, as specified.
As an urgency measure, SB 16 would take effect immediately and
be repealed as of July 1, 2020.
Related
Legislation: SB 321 (Beall) would authorize BOE to make
specified adjustments to the gasoline tax swap. SB 433
(Berryhill) would require the Department of Finance, instead of
BOE, to determine the annual excise tax rate adjustment for
gasoline and diesel fuel under the "fuel tax swap" provisions
for 2016-17 through 2020-21.
Staff
Comments: BOE estimates that the bill would increase gasoline
and diesel excise tax revenues by $1.007 billion in 2015-16 (a
partial year estimate, assuming an effective date of December
11, 2015) and $1.790 billion in 2016-17. The figures include
floor stock revenues of $13.8 million for gasoline and $2.9
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million for diesel. Total associated state and local sales and
use tax revenues would rise by $41.2 million in 2015-16 and
$73.1 million in 2016-17. In sum, total excise and sales tax
revenues would rise by $1.048 billion in 2015-16 and $1.863
billion in 2016-17.
The $0.10 increase in gasoline excise rate would affect the
aviation gasoline (AvGas). Staff notes that the associated
revenues should be allocated to the Aeronautics Account. The
bill currently has the excise surtax revenues being allocated to
RMRA. Recent Federal Aviation Administration policy notice makes
it clear that the excise tax on AvGas would need to be allocated
to airports. Aviation gas is very small in relation to on-road
gasoline; specifically, aviation gas gallons are just 0.1
percent of the total. Revenues for aviation gas are $0.9 million
in 2015-16 (including the floor stock tax) and $1.6 million in
2016-17.
With respect to administration costs, the bill would require BOE
to immediately modify computer programming, revise publications,
process additional returns and payments, carry out compliance
and audit efforts to ensure proper reporting, and increase
investigative activities. Additionally, BOE staff would need to
identify and register additional taxpayers due to the floor
stock tax. BOE fuel tax swap responsibilities would include
explanation of the indirect effect tax rate changes have on the
fuel tax swap rate calculation. Specific costs have yet to be
ascertained, but would minimally reach the hundreds of thousands
of dollars annually.
DMV indicates that about 31 million vehicles are currently
registered in the State. Consequently, the bill's $35 increase
to the annual registration fee would generate about $1.085
million, rising in the out years as the number of registered
vehicles increases.
DMV indicates that 108,000 zero-emission vehicles are currently
registered in the State. Thus, the bill's $100 annual
registration fee on these vehicles would generate $10.8 million,
also rising in the out-years as the number of zero-emission
vehicles increases.
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DMV would incur one-time programing costs of $350,000, with an
additional $25,000 each time the VLF rate is reset.
Budgetary documents indicate that 2015-16 VLF revenues at the
0.65 percent rate are projected to total $2.258 billion.
Assuming no growth in either (1) the number of vehicles in the
State, or (2) depreciation, a 1.0 percent VLF rate would
generate an additional $1.216 billion.
CTC indicates that the bill would require 3.5 positions and
about $577,000 to carry-out duties prescribed by the bill,
including preparation of performance criteria and other new
responsibilities.
Finally, though the gasoline and diesel fuel tax swaps are
designed to be revenue neutral, they would be indirectly
affected by this bill because the increases in the gasoline and
diesel excise rates are assumed to be passed on to consumers,
resulting in higher gasoline and diesel prices.
For gasoline, because the bill would raise the price by $0.10
per gallon, the five percent General Fund rate prior to
implementation of the gasoline tax swap implies a $0.005 per
gallon increase in the fuel tax swap rate. This additional price
is not reflected in the FY 2015-16 gasoline surtax rate, which
is set to be $0.12 per gallon. However, if enacted, when the
gasoline rate is set for the subsequent year, additional sales
tax revenue would be foregone, resulting in the need for a
higher excise rate (to ensure revenue neutrality) that what
would have happened on the natural.
For diesel fuel, because the bill would raise the price by $0.12
per gallon, and the diesel swap rate is set at 1.75 percent, the
bill would raises diesel taxes by $0.0021 per gallon. Unlike
gasoline, this impact would be reflected in higher diesel prices
when the new tax rate is paid. To keep diesel prices revenue
neutral to its pre-swap rate of $0.18 per gallon, the measure's
indirect effect would reduce the rate by $0.0021 per gallon the
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next time it is set.
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