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Higher gas prices mean increased tax revenue for California: Fueling the tax coffers
(Ventura County Star (CA) (KRT) Via Acquire Media NewsEdge) Jul. 13--A piece of advice for the out-of-stater who's upset about the high price of gasoline: Don't gripe to a Californian.
Pump prices here are almost always higher than in the rest of the country, partly because taxes -- assessed to maintain roads and highways -- are higher. The prices also reflect California's stringent clean-fuel requirements and a tight supply-and-demand situation. There are relatively few sources for the state's unique blend of gasoline.
But, as Joe Sparano, president of Western States Petroleum Association, pointed out, "One of the big reasons people don't often focus on is California's taxes at the pump are the highest in the country."
California charges a 7.25 percent sales tax, on top of the excise taxes on each gallon of gas -- 18.4 cents, federal, and 18 cents, state.
It wasn't always this way.
In 1990, Californians had one of the lowest gasoline taxes in the country, while paying an average of $1.12 per gallon.
Times were so good that backers of Prop. 111 were able to persuade California voters to double the excise tax from 9 cents to 18 cents.
They said it would cost motorists a measly $60 a year on average. An excise tax is assessed on the sale of a specific good, such as gasoline, according to the Internal Revenue Service.
What seemed like a small tax increase then is adding to today's skyrocketing prices at the pump. Californians pay nearly 75 cents in taxes on every gallon of gas to the state and federal government -- more than any other state, according to the July report from American Petroleum Institute, a trade association that represents the oil and natural gas industry.
California's 7.25 percent sales tax is generating what some say is a windfall for the government, because the amount collected is tied to the price of gasoline.
Ventura County's average price for regular unleaded was $4.55 a gallon Friday, up from $3.13 a gallon for the same date a year ago.
California estimates sales tax revenue from gasoline purchases will be $2.67 billion in fiscal 2008-09, while the state excise tax is projected at $2.9 billion.
But consumption is declining as consumers shed gas-guzzling vehicles and seek to drive less. Californians used 3.2 percent less gasoline in March than the same month a year ago, according to the state Board of Equalization, so sales tax revenue could decrease.
For now, the state reports that nearly twice as much sales tax is being generated annually from gasoline purchases than five years ago.
The government began collecting gasoline taxes in 1919, when motorists pressured lawmakers to create and maintain a system of roads.
The first state to do it was Oregon, which charged 1 cent per gallon, according to a recent Tax Foundation paper written by Jonathan Williams, director of the Tax and Fiscal Policy Task Force at the American Legislative Exchange Council. The Tax Foundation is a nonpartisan educational organization in Washington, D.C.
Gasoline taxes met with little public resistance as they were economically justified by the benefit principle of taxation, which provides that "consumers of government services should be taxed in proportion to the benefit they obtain from those services," Williams wrote.
"When gasoline tax revenue was spent on improving roads, motorists were more than willing to pay the levy to obtain greater mobility."
It's also fairer to the people who don't drive, because they are not being taxed to service roads they don't use, according to Williams.
The Tax Foundation does not approve of states using their excise tax revenue for purposes other than maintaining roads.
"Because at least the people are getting the money back in the government service they are paying for," said spokesman William Ahern.
As for the excise tax revenue, fiscal and policy analyst Jessica Bird, with the state Legislative Analyst's Office, said the bulk of it -- after the cities and counties get a share -- "goes for maintenance and rehabilitation of the highway system, and it also covers administration of Caltrans."
Ahern said his organization would "under no circumstances" advocate abolition of sales taxes on gasoline because that money is needed to help the government run.
Gasoline taxes spark more anger than other taxes because people have no choice but to pay them, Ahern said.
"To change our lives to avoid gasoline purchasing is almost impossible," he said, "and so naturally it's a more aggravating tax than on what you might call luxury purchases."
To see more of the Ventura County Star, or to subscribe to the newspaper, go to http://www.venturacountystar.com.
Copyright (c) 2008, Ventura County Star, Calif.
Distributed by McClatchy-Tribune Information Services.
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