Dan Walters

By Dan Walters
February 1, 2016 3:55 PM

  • Fuel prices drop to under $2 a gallon in some areas
  • As prices decline, gas taxes are adjusted downward
  • Meanwhile, politicians mull raising taxes for roadwork

California gasoline prices have been dropping sharply of late – below $2 a gallon in some areas.

That’s still somewhat higher than those in many other states, and some self-described consumer groups are still trying to portray California motorists as victims of oil industry greed.

However, most, if not all, of the remaining differential can be explained by our unique fuel blends, aimed at curbing air pollution, coupled with California’s generally higher business operational costs and, finally, our relatively high gas taxes.

We have the nation’s fourth-highest fuel taxes by one recent survey, and they may be the highest if the dime-a-gallon impact of placing fuel in the “cap-and-trade” carbon emissions program is added.

Meanwhile, as high as California’s fuel taxes may be, there’s a simmering debate in the Capitol over whether they should be raised to reduce a backlog of much-needed roadway repairs and/or whether gallonage taxes should be scrapped altogether in favor of mileage-based levies that would hit electric and hybrid car owners.

As retail gas prices decline, taxes become an ever-greater portion of those prices, even though the taxes themselves are declining because of declining prices. And if that sounds confusing, it’s because the state’s politicians have made it so.

For many years, the state’s fuel levies were split between a gallonage tax – last increased in 1994 – and a sales tax applied to the retail price.

However, in 2010, then-Gov. Arnold Schwarzenegger and legislators enacted a “fuel tax swap” that eliminated the state’s sales tax on gas (but not local sales taxes) and decreed that the gallonage tax would be increased by an equivalent amount.

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