Gas tax relief would have been nice as Californians hit the road the 4th of July weekend. Instead, they were slammed with a tax hike.
It’s the kind of thing we’ve learned to expect from one-party rule and a liberal state government in Sacramento. There are simply no bipartisan concessions.
If Republicans had any influence in the state Capitol, there likely would have been a negotiated tax deal that would have lowered gas prices at the pump.
But the California GOP has become so weak that it is no longer invited to the negotiating table. With supermajority control, Democratic lawmakers can pass anything they want without Republican votes.
The only significant negotiation among Sacramento politicians is between Democrats — liberal lawmakers and liberal Gov. Gavin Newsom. And of course, the result is almost always liberal.
The gas tax hike that landed on Friday was only about 3 cents per gallon — tiny compared to the average pump price of $6.25 statewide. But it was the wrong way.
The small bump represented an automatic annual increase that “indexes” the tax to inflation. The total excise tax per gallon went from about 51 cents to about 54 cents.
The legislature and government of the time. Jerry Brown put this in place in 2017 when they significantly increased the tax. Republicans tried to repeal it, but voters kept the tax and with it the annual hike.
Lawmakers could have suspended the increase and, for that matter, the entire excise tax. But the liberal leadership of the legislature hesitated.
To his credit, Newsom offered to suspend the tax hike for a year. But he gave in during the negotiations.
Republicans, sensing a marketable campaign problem, called for a “gas tax,” arguing that the entire 54-cent tax should be suspended for up to a year.
Not just Republicans, but President Biden. He recently asked Congress to repeal the federal gasoline tax of 18 cents per gallon for three months. And he urged states to suspend their own levies.
Understandably, in this polarized era, congressional Republicans were opposed to what a Democratic president wanted.
“This is a transparent partisan political stunt and a fundamentally bad idea,” said Rep. Tom Cole (R-Okla.).
But in Sacramento, Republicans have the opposite view — likely in large part because it’s Democrats here who oppose the tax exemption.
“President Biden understands the value of suspending the gas tax, but Democrats in Sacramento and this governor are deaf to their party leader and our pain at the pump,” said Republican Senate Leader Scott. Wilk of Saugus in a statement Friday.
Sacramento Democrats say the gas tax suspension is wrong for three reasons:
— The money is needed for the improvement and repair of the roads. The tax generates $7.7 billion a year.
— There is no guarantee that the tax cut would not just be pocketed by the oil companies and that prices at the pump would never be lowered.
— The poor who don’t own a car wouldn’t benefit.
The first argument is false. Last week, budget framers projected a revenue surplus approaching $100 billion. There are barrels of money to replenish the highway fund without collecting gasoline taxes.
There are, however, legitimate fears that the oil companies are ripping off the tax benefit. Distributors pay the tax and add the cost to what they charge stations for filling their underground reservoirs. The stations then add it to the price at the pump.
“The benefit of the tax cut could be diverted upstream before it reaches the consumer at the pump,” said HD Palmer, spokesman for the state Department of Finance.
OK, but New York and other states have suspended the gas tax and haven’t had a significant problem with oil company scams. You hope California could be on top of gas distribution and punish a greedy company that cheated motorists.
As for the poor who do not own a car, this means that they are also not affected by high gasoline prices.
Newsom initially offered to give $750 million to transit agencies so they could help the poor by providing free rides for three months.
He also offered to suspend the sales tax on diesel fuel for a year – and got it in the final deal. It will cost the state $439 million.
Why suspend sales tax on diesel but not gasoline? It’s part of a pro-business package. The goal is to reduce fuel costs for truckers transporting products to stores. Theoretically, this will also reduce the cost of consumer goods.
Newsom has proposed sending each car owner $400 – $800 maximum for more than one vehicle – but lawmakers have avoided helping motorists alone. They wanted to help fight inflationary price hikes on all consumer products, like groceries, not just gasoline.
The governor and lawmakers have agreed to a $9.5 billion benefits package they call a “tax refund.” Around 95% of filers will benefit, thanks to Newsom.
Individuals earning up to $250,000 and couples earning up to $500,000 will get something. Lawmakers wanted to deny benefits to people earning half that amount — providing nothing for filers with earnings over $125,000 and $250,000, respectively.
Benefits will range from as little as $200 for high earners to $1,050 for couples with children earning less than $150,000.
But checks are not mailed. The money won’t start rolling in until October, just before politicians run for re-election. Deliveries will not be completed until January.
In fact, I think most of the state benefit money should have been spent on necessary infrastructure: water facilities, forest fire prevention, homeless shelters.
That said, a gas tax suspension would have been great communication for Democrats and would have diluted a Republican campaign issue.
Imagine the goodwill generated by a dramatic 50 cent per gallon drop in pump prices over the holiday weekend – rather than a 3 cent rise in the eye.