BILL ANALYSIS Ó
SENATE COMMITTEE ON GOVERNANCE AND FINANCE
Senator Robert M. Hertzberg, Chair
2015 - 2016 Regular
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|Bill No: |SB 433 |Hearing |4/22/15 |
| | |Date: | |
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|Author: |Berryhill |Tax Levy: |No |
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|Version: |4/6/15 |Fiscal: |Yes |
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|Consultant|Bouaziz |
|: | |
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MOTOR VEHICLE FUEL TAXES: DIESEL FUEL TAXES: RATES:
ADJUSTMENTS
Requires the Department of Finance (DOF), instead of the Board
of Equalization (BOE), to determine the annual the fuel tax swap
rates.
Background and Existing Law
The BOE determines and sets rates for various tax and fee
programs it administers, such as the tobacco products tax rate,
diesel interstate users tax rate, hazardous substances program
fees, and the occupational lead poisoning prevention fee. These
rates are calculated by BOE staff based on prescribed
methodologies. The BOE Members approve these rates annually in
a public meeting.
Fuel Tax Swap
In 2010, the Legislature enacted two "fuel tax swap" measures
that changed the imposition and rates of state taxes on gasoline
and diesel fuel, and require the Board of Equalization (BOE) to
annually determine the appropriate excise tax rate adjustments
to maintain revenue neutrality (ABx8 6, Assembly Committee on
Budget, 2010) and (SB 70, Senate Committee on Budget and Fiscal
Review). The gasoline tax changes became operative on July 1,
2010, and the diesel fuel tax changes on July 1, 2011.
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The fuel tax swap was partly enacted, to allow the use of
additional existing transportation revenue for highway purposes,
including General Obligation bond debt service, where that debt
service was related to transportation projects.
The swap bills exempted sales and purchases of gasoline from the
state sales and use tax rate. To offset the revenue loss
related to this partial exemption, the law increased the
gasoline excise tax rate from $0.18 per gallon to $0.353 per
gallon. Conversely, the measure reduced the diesel fuel excise
tax rate from $0.18 to $0.13 per gallon, but increased the sales
and use tax rate on diesel fuel sales to offset the loss related
from the reduction, resulting in the following rates:
1.87%, effective July 1, 2011,
2.17%, effective July 1, 2012,
1.94%, effective July 1, 2013,
1.75%, effective July 1, 2014, and thereafter.
The fuel tax swap provisions require BOE to maintain revenue
neutrality, so that the revenues derived from the increased
gasoline excise tax and the increased diesel sales and use tax
equals the revenues that would have been derived had the
gasoline sales and use tax partial exemption and the diesel fuel
excise tax reduction, respectively, not occurred.
To maintain revenue neutrality, state law requires BOE to
annually adjust the gasoline and diesel fuel excise tax rates
either upward or downward. For gasoline, the BOE determines:
(1) whether the sales and use tax revenue loss related to the
partial exemption was fully offset by the adjusted rate, and (2)
the projected sales and use tax revenue loss for the next fiscal
year, considering forecasted gasoline prices and consumption.
For diesel fuel, the BOE determines: (1) whether the revenue
gain from the increased sales and use tax rate on diesel fuel
sales and purchases was fully offset by the adjusted diesel fuel
excise tax rate, and (2) the projected sales and use tax revenue
gain for the next fiscal year, considering forecasted diesel
fuel prices and consumption. By March 1 each year, the BOE must
determine the rate adjustments and the adjusted rate applies on
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the following July 1.
Proposed Law
Senate Bill 433 requires the Department of Finance (DOF)
beginning on March 1, 2016 and ever March 1 going forward, to
annually calculate and adjust the gasoline and diesel tax rates.
SB 433 requires DOF to notify BOE of the calculated rates by
March 10, 2016, and each March 10 thereafter.
This bill becomes effective January 1, 2016.
State Revenue Impact
None.
Comments
1. Purpose of the bill. According to the author, "The
determination of the gasoline and diesel fuel excise tax rate is
a ministerial function that the Department of Finance (DOF)
already calculates in the Governor's yearly budget. The Board
of Equalization (BOE) staff simply calculate a "true-up" of the
DOF calculation to set the tax rate. Because the fuel tax rate
is voted on by elected officials from different parties in a
public hearing, the issue is often politicized. Additionally,
the BOE is an agency that collects taxes and performs tax
audits. The agency was not designed to forecast prices on goods
like gasoline. SB 433 will shift the responsibility of setting
the gasoline and diesel fuel excise tax rate to the DOF
beginning in the 2016-17 fiscal year. The Department already
performs these calculations, so no additional responsibility
would be given to the DOF. SB 433 will make this process less
political and help reduce redundancy in state government."
2. Why? It is unclear why DOF and not BOE should be responsible
for annually calculating the fuel tax swap rates. Although DOF
currently provides the yearly fuel consumption estimates and
forecasted prices to determine the rates, BOE has the
relationship with taxpayers and would continue to provide
notices and information about the adjusted fuel tax rates.
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Additionally, BOE would continue to set rates for several other
tax and fee programs.
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3. Related legislation. Senate Bill 321 amends the method BOE
uses to adjust the fuel tax swap rates. The bill was approved
by the Committee on April 15, 2015.
Support and
Opposition (4/16/15)
Support : Unknown.
Opposition : Unknown.
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