Wednesday, May 26, 2004
AFFAIRS OF STATE (Column)
Tax Collector Gets a Windfall When Gas Prices Increase
By DAVID KLINE
Rising gasoline prices are hurting California businesses, consumers and the economy in general. But the people who collect sales taxes on gas are having a field day.
In California, there are several layers of taxes on gasoline. The federal government assesses 18.4 cents on every gallon sold, the state government adds another 18 cents per gallon and then the state and local governments collect a sales tax on top of the whole thing.
The combined state and local sales tax rate is 7.75 percent in Sacramento. (And like everywhere else, that is calculated after the 36.4 cents in gas taxes are added to the price—a morally indefensible tax on a tax—but that is fuel for another column.)
Since the sales tax is a percentage of the cost, when the cost goes up, so does the tax.
Take a look at how the sales tax collector makes off with your money:
Californians use about 1.1 billion gallons of gasoline per month, according to the California Energy Commission. That adds up to about 13.2 billion gallons a year—a total that will increase to more than 15 million gallons a year in the very near future, energy analysts say.
Last year, the average price for a gallon of unleaded regular in California was $1.869, according to the AAA Daily Fuel Gauge Report. Multiply that by 13.2 billion gallons, and you get $24.67 billion spent on regular gasoline for the year.
At the 7.75 percent sales tax rate, that would generate $1.91 billion for state and local government.
Now let’s do the same calculation using the average price of the same grade of gas as of this writing, $2.305 per gallon. The yearly total would be $30.43 billion, and the sales tax revenue would be $2.36 billion—$450 million more than last year when gas prices were lower.
So as gas prices go up this year, the state and local governments stand to receive about $450 million more in sales taxes, without having to do a thing. That’s nearly half a billion dollars taken out of our pockets even as we’re struggling to pay the higher base cost.
These figures aren’t exact. The sales tax rate ranges from 7.25 percent to 8.5 percent, depending upon the county, and actual gas prices vary from station to station, so it would be impossible to calculate the exact tax impact without knowing how many gallons are purchased in each county, and at what price.
Still, the numbers above illustrate the magnitude of the sales tax hit that occurs when gas prices go through the roof.
The flip side is that when the gas prices increase, the cost of fueling government vehicles also increases, so some of the new tax money—but certainly not the entire half-billion—gets burned in the combustion chambers of police cars, fire trucks and the governor’s Hummer.
Given the state’s current fiscal situation, the sales tax windfall of 2004 will be spent before it even arrives in the tax collector’s coffers. But for the benefit of future motorists, the state should change its policies so rising gas prices will no longer create a double-whammy on taxpayers.
Copyright 2004, Metropolitan News Company