Analysis News & Analysis

California Gas Taxes to Increase July 1

California gas taxes are set to increase as the legislature approaches the May 1 deadline to suspend the annual tax increase despite the efforts of California Republicans and Governor Newsom. With no bill on the floor to prevent the increase, gas taxes will rise from 51 to 53.6 cents per gallon on July 1. 

This increase comes amid the highest inflation in decades and record high gas prices across the country, especially in California. California already has the nation’s highest gas prices, with a state average of $5.68 per gallon clocking in at $1.55 per gallon above the national average. In some parts of the state, the price of gas has well exceeded $6 per gallon, with Mono County reporting an average price of $6.61 per gallon.

Republican lawmakers have been pushing to suspend the gas tax for a period of 8 months, but have faced pushback from their Democratic colleagues concerned about lost revenue. California presently has a $46 billion budget surplus, a figure expected to increase once income taxes from this year are processed. For reference, California’s gas tax is projected to bring in $8.8 billion in revenue. 

Governor Newsom has floated support for halting the increase in the past, but has pivoted away from that position now that the legislature seems unlikely to support it. 

“It is clear now that the Legislature will not act in a timely manner to provide that immediate, limited relief,” Spokesperson Alex Stack said in a statement from the governor’s office. “But we look forward to working with lawmakers on the governor’s proposal for direct payments to Californians wrestling with higher gas prices.” 

Critics have expressed skepticism that rebates will not be of much help given the procedural red tape involved in getting them out, and the fact that they would be available to high income individuals and even those who drive electric vehicles. 

Inflation is estimated to be roughly 8.5% per year, but most government indices do not include the price of food and gas on the grounds that these prices are by their nature somewhat volatile; gas prices are up 43% from last year’s $2.88 per gallon. The cause of inflation in general and gas hikes in particular is a topic of political dispute, with economists advancing high government spending, loose monetary policy and supply chain problems in the wake of the COVID-19 pandemic as primary factors. The recent war in Ukraine and associated sanctions between Russia and the West are emphasized by the Biden Administration as the key factor in rising gas prices, though critics of the administration point out that gas prices had been rapidly rising long before the outbreak of hostilities, pointing to the administration’s own hostile policies towards domestic production of and overall stance on fossil fuels.