Last month, members of the California State Board of Equalization voted to lower the excise tax rate for gasoline by 6 cents beginning July 1. Since 2010, the “fuel tax swap” law has required the board to adjust this tax rate by March 1 of each year. The excise tax rate on gasoline will be $0.30 per gallon from July 1, 2015 to June 30, 2016. The current excise tax rate of $0.36 is in effect through June 30, 2015.
Drivers pay two types of state taxes on gasoline — sales tax and a per-gallon excise tax. Before the FTW took effect, drivers paid the full sales tax rate (then 8.25 percent) and an excise tax of $0.18 per gallon.
The FTW lowers the sales tax rate to 2.25 percent on gasoline and requires BOE to set the per-gallon excise tax rate, so drivers pay the same amount of state taxes on gas as they would have paid under the prior tax structure.
In addition to projecting sales tax revenue that would have been generated under the old tax structure, the law also requires BOE to review the actual excise tax revenue generated in the prior fiscal year and subtract that from projected revenue for the coming fiscal year. This calculation determines the coming fiscal year’s excise tax rate.
The excise tax on gasoline pays for public road improvements and mass transit. In fiscal year 2013-14, BOE collected nearly $5.8 billion for the Motor Vehicle Fuel Account, Transportation Tax Fund. The sales tax on gasoline primarily funds local government programs.