The California State Board of Equalization voted to lower the excise tax rate on gasoline by 2.2 cents per gallon for fiscal year 2016-17. The new gasoline excise tax will be 27.8 cents per gallon and is effective July 1, 2016, through June 30, 2017.

“Today’s vote was simply a matter of fairness. Californians overpaid gas tax last year because of a bizarre formula known as the ‘gas tax swap’ passed by lawmakers in 2010,” said Board of Equalization Vice Chair George Runner in a press release. “Lowering the rate is the right thing to do, and I’m sure Californians will welcome this reduction.”

The board has been tasked with setting the excise tax rate on gasoline since 2010, when two pieces of legislation (AB x8 6 and SB 70) were enacted.

In March 2010, Gov. Arnold Schwarzenegger signed the two fuel-tax measures, commonly referred to as the fuel tax swap. This legislation adjusted the rates of the sales and excise tax on gasoline, effective July 1, 2010.

State law currently imposes a sales tax and an excise tax on motor-vehicle fuel.

The fuel tax swap legislation was designed to be revenue neutral, ensuring overall state taxes paid by consumers at the pump are the same as they would have paid under the prior tax structure.

The legislation mandated the BOE adjust the excise tax rate every year by March 1. The new rate is effective July 1 of each year. The current excise tax rate of 30 cents per gallon for gasoline remains effective through June 30, 2016.

In fiscal year 2014-15, the excise tax was 36 cents per gallon and raised nearly $5.4 billion, which was about $400 million less than the prior year, when the tax was 39.5 cents per gallon.

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