California gas tax increase starts on Monday

The price of gasoline in all of California will go up 3.5 cents on Monday, courtesy of a state-mandated process.

Back in February, the State Board of Equalization approved raising the excise tax for gasoline from 36 cents to 39.5 cents a gallon, set to take effect on the first day of July.

Not that the board has much choice.

The excise tax is the byproduct of state laws, signed by former Gov. Arnold Schwarzenegger in 2010, that created a new tax structure for gasoline and mandated that the board adjust the state gas excise tax rate by March 1 of each year.

The so-called “fuel tax swap” laws require BOE to lower the sales tax on fuel and raise the excise tax by a corresponding amount to ensure “revenue neutrality.”

The new tax structure eliminated the general fund portion of the sales and use tax on motor vehicle fuel and raised the excise tax. The change was proposed when the state sales tax rate was reduced in 2010, and the Schwarzenegger administration was looking for ways to free up money to balance the state budget.

The swap was designed to ensure that state taxes consumers pay at the pump remain the same as they would have been under the previous tax structure.

The current structure is tied to the price of fuel but also involves estimating future gasoline consumption within the state.

There’s still sharp disagreement over the process, as evidenced by BOE’s 3-2 vote on the mandated hike in February.

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