The California State Board of Equalization (BOE) will consider adjusting the excise tax rate for gasoline downward by $0.035 during its scheduled February 25, 2014 meeting in Culver City.
Gasoline prices have declined and are projected to remain low during the next fiscal year. If adopted, between July 1, 2014 and June 30, 2015, the excise tax on gasoline will be $0.36. The current excise tax rate is $0.395.
“This reduction in the excise tax of $0.035 will guarantee that the total taxes collected do not exceed the amount authorized by the legislature,” Chairman Horton said. “Historical data indicates that this legislation requiring the adjustment does not have an impact on overall gas prices. However, it would be nice if this decrease in excise tax would result in a corresponding decrease in gas prices.”
Legislation known as the “fuel tax swap” was approved and signed into law in 2010. The law lowered the sales tax rate on gasoline by 5 percent, and increased the excise tax rate per gallon of gasoline to assure that consumers would pay no more or no less in state gasoline taxes that they would have paid before the swap. The Board of Equalization has no independent authority to raise or lower taxes. In-stead, it must continue to assure this revenue neutrality by adjusting the excise tax rate annually.
The “fuel tax swap” mandates the BOE to set the excise tax rate for gasoline by March 1 of each year.
The BOE sets the rate based on the projected price and number of gallons drivers will purchase in the upcoming fiscal year. The upcoming annual rate also accounts for the difference in the actual and estimated sales tax revenue in the prior fiscal year that would have been collected under the old tax structure. The sales tax on gasoline funds a variety of programs while the excise tax revenue is used for public roads and mass transit.
BOE forecasts are based on price and purchase projections from the Department of Finance and IHS Global Insight, an internationally recognized firm that provides comprehensive economic and financial data to nations and states.