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Going green may lead Sacramento to hemorrhage red ink by the oil barrel
Dennis Wyatt 2022
Dennis Wyatt

California has a problem

OK, it has a lot of problems.

After all, “along with the sunshine there’s got to be a little rain sometime” as Lynn Anderson notes on her signature 1970 mega-hit “I Never Promised You a Rose Garden”.

This problem is taxing.

More precisely, it’s what you fork over at the pump.

Every gallon of gas you pay has a 58 cent gas tax that will go up to 60 cents on July 1.

You pay 18.4 cents in federal gas tax.

You pay 23 cents for California’s cap-and-trade program to reduce greenhouse gas emissions.

You pay 18 cents for California’s low carbon program.

You pay 2 cents for underground gas storage fees.

And the stealth ticking financial time bomb, you pay an average of 10.7 cents per gallon.

The exact sales tax varies based on the jurisdiction where it is purchased and the actual gallon price of gas.

That’s roughly $1.30 in taxes and “fees” you fork over every time you pump a gallon of gasoline.

Since California is pulling the plug on the sale of new vehicles that run on gas or diesel in 2035, that means the spigot that flows roughly $18 billion a year into state coffers is being turned off in 430,000 little turns on an annual basis.

That’s because of the 1.775 million new vehicles sold in 2023 in California, just over 25 percent were zero-emission.

That means they don’t pay and taxes and fees at the pump.

There is solution in the works that EV owners aren’t going to like.

And it will lessen the financial operating advantage of operating an EV as opposed to a gas-powered engine.

In 2022, California collected $8.8 billion in state gas taxes on 13.6 billion gallons of gas sold.

About two thirds of that $8.8 billion went to the state for highway maintenance, rehabilitation, and improvements plus support for public transit for buses, light rail, and heavy rail.

The remaining two thirds goes to cities and counties for local road maintenance and rehabilitation.

Californians, on average, pay roughly $300 annually in state gas taxes.

That means when a gas powered vehicle is replaced by an EV, Sacramento loses money.

EVs are slapped with an additional $100 annually for the road fund in annually registration fees on top of the everyone pays based roughly on the vehicle’s value.

As a result, the state only loses $200 a year on every EV sold.

It is actually worse.

Most EVs are significantly heavier than their internal combustion counterparts. As such, they wear pavement more per mile driven.

It is why Caltrans is proposing the “California Road Charge.”

It invokes recording the number of miles driven annually and taxing the registered vehicle owner accordingly.

Rates per mile such as 0.02, 0.03, and 0.04 cents are being tossed about.

Based on various scenarios, the gas powered vehicle drivers will likely pay less with EV owners paying more

A pilot program is being launched in July. It is designed to help legislators to decide how best to replace the gas tax.

It will involve three options to track mileage.

uSending Caltrans a monthly photo of the odometer.

uHooking up an electronic device to a vehicle.

uUtilizing a vehicle’s built-in tracking system.

Figuring a way to replace the state gas tax for roads will be fraught with minimal political fallout.

Because it can be done in a manner that simply shifts to miles driven the state can come close to actually being revenue neutral while allowing for inflation.

Acceptance of a gas tax replacement on the state level may not be excessively difficult given the existing transparency.

Not so with the rest of the fees and sales tax which are anything but transparent.

Gas tax receipts do not reflect any taxes or fees for that matter.

The state prefers it that way.

If you doubt that, just think what the response of most people would be if they spend $75 on 15 gallons of gas and their receipt clearly states $19.50 of that is for taxes and fees.

It’s the old what-you-don’t-know-won’t-hurt-you approach to government.

Yes, you can see postings at most gas station on window deals and such stating what the state and federal gas taxes are.

But you won’t see it on a receipt.

That means finding a way to replace the $1.45 billion annually (2022 figures) collected by California in the form of sales tax on gas is going to be problematic to say the least.

Anything proposed will look like a new tax.

Worst yet, a large chunk of that sales tax goes to cities and counties.

It’s a minimum of 1 percent of the 7.75 percent tax collected.

And if there are other taxes — in Manteca’s case 0.5 percent for public safety and 0.5 percent for Measure K road and transit tax collected throughout San Joaquin County — shrinking gas sales will reduce revenue flowing in for add-on local taxes.

The 41 cent per gallon green taxes will have to be replaced somehow.

That includes money that is sunk into the ever growing money pit known as high speed rail.

Any bets whether Sacramento will conclude they need to place a sales tax on electricity?

After all, electricity is replacing fossil fuel.

And with people charging and at home and at public facilities, there is no way to tax all juice used to charge electric vehicles separately.

That means the best way would be taxing all electrical use except that needed to power high speed rail.

Government agencies are exempted from paying sales tax so its logical for high speed rail to dodge that expense.

And let’s not forget Congress has to come up with a way to replace diminishing revenue from the 18.4 cents federal gas tax to support upkeep of the interstate system and new road projects across the nation.

Responsible leaders would be addressing how to replace government revenue losses at the same time they impose EV mandates or require the use of other zero-emission vehicles.

Politicians are rarely accused of being responsible.

In this case, kicking the can too far down the “highway” could prove devastating.

The devastation, however, that politicians put first and foremost to addressing is their own political necks.

It is why they are allowing an obvious train wreck on the making to gain momentum.

Adding a bit of intrigue is a ballot measure Gov. Gavin Newsom and the California Legislature are scrambling to get a judge to block.

The measure, if passed, would mandate any new state tax to be approved by voters.

The green mandate may ultimately mean Sacramento will have less green.