News & Analysis

CA Democrats Propose Gas Rebates, Set Gas Tax Increase for July 1

California Democrats have unveiled their latest inflation relief measure, this time in the form of up cash rebates of up to $1050 per household to offset record gas prices, while denying a motion to prevent an increase in California’s gas prices to 54 cents per gallon on July 1. 

The proposal, part of Democrats’ budget proposal for this year, awards a cash refund dependent on one’s income, ranging from $1050 for a joint-filing couple making under $150,000 with at least one dependent, to nothing for those making over $250,000 as single filers. 

The rebate proposal comes as Californians face record gas prices; in California, the average cost of regular gas has exceeded $6 per gallon. Because California taxes and regulations add an estimated $1.20 to each the cost of each gallon, Republican lawmakers have proposed a gas tax rebate as an alternative to cash refunds. 

However, both proposals seem to have overlooked the most important factor in why California’s gas prices are so different from those of even neighboring states; California has its own unique gas blend requirement to cut down the state’s “worst in the nation” pollution and smog. Because California requires its own special gas, only six refineries — just enough to meet California’s demands — produce 96% of California’s gas. 
Due to this state-mandated monopoly, this handful of California-specific refineries don’t have to compete with the rest of the nation’s refineries and don’t benefit from economies of scale, which allows them to charge significantly higher rates. In addition to cash rebates, Democrats are proposing to require these refineries to publish how much of a surcharge they are adding, then instituting an “excess profits tax” on said refineries to “give [money] back to consumers.”