New California gas tax hits, bringing even higher pump prices

LOS ANGELES — Californians contending with the highest gas prices in the nation will pay another 3 cents per gallon starting Friday due to the state’s annual gas tax increase.

Yes, you read that right: Gas prices will go up due to the state’s excise tax on gasoline, which is adjusted each year.

Golden State drivers on Thursday were already paying an average of $6.289 for a gallon of regular gas, far more than the national average of $4.857 and the most of any state, according to the American Automobile Assn.

But the number had represented something of a relief as it inched down from the record high of $6.438 a couple of weeks ago, dropping on Thursday for the 16th consecutive day.

Now, the excise tax will see prices go up again. The tax is increasing from 51.1 cents to 53.9 cents per gallon, the second highest such charge in the nation, with only Pennsylvania’s excise tax clocking in higher.

The hike comes just days after Gov. Gavin Newsom and state Democrats reached a budget deal for gas tax relief, which will be delivered in the form of refunds to the state’s residents.

But several state leaders, including many in the GOP, had been pushing for the state to temporarily suspend the gas tax altogether.

“The Governor and the Legislature could have suspended the state’s gas tax and stopped this,” Assemblyman Vince Fong (R-Bakersfield), vice chair of the Assembly Budget Committee, said in a statement about the increase. “But by choice, the ruling party in Sacramento is choosing not to do so. The result will be more rising costs on practically everything.”

Newsom and other Democratic leaders ultimately rejected the idea of suspending the gas tax increase, with some arguing that doing so would cut off funding for much-needed infrastructure projects and cost jobs.

Others said there was no guarantee that the oil companies would pass the savings on to consumers, with Democratic Assembly Speaker Anthony Rendon announcing a legislative inquiry to determine whether oil companies are “ripping off” drivers.

However, President Biden in June asked Congress to suspend the federal gas tax through September, a move that he said could shave off 18 cents per gallon.

In a letter to Newsom on Monday, nearly a dozen Republican members of Congress asked the governor to follow Biden’s lead. They also called on Newsom to support a repeal of the state’s policy of indexing the gas tax to inflation.

“Amidst historic uncertainty in global energy markets and California’s unique vulnerability to supply shocks, California families deserve tax relief that reflects the severity of the economic realities they face,” said the letter, signed by Jay Obernolte, Kevin McCarthy, David Valadao and other GOP leaders.

Severin Borenstein, an energy economist at UC Berkeley, said he didn’t think pausing the gas tax without a clear path for restoration made sense, but he also disagreed with the argument that it would cut spending.

“The Legislature could shift revenues from other parts of the budget to fill that in, as they’re doing right now to pay these rebates,” he said. “I think the reality is that neither side views the three cents as a big deal.”

In fact, he said many consumers might not even notice the extra three cents “compared to all the ups and downs of crude prices,” which have been highly volatile lately. The price of crude oil dropped from about $120 per barrel to $110 per barrel in recent weeks, he said, translating to a savings of about 25 cents a gallon.

Borenstein cautioned that suspending the tax without raising it to a “reasonably high level” later would encourage people to go back to driving gas-guzzling cars when the price drops again.

“The problem would be, how to do we get people to continue to choose [electric vehicles] when gasoline is so cheap,” he said.

He said a bigger priority for the Legislature should be what he called the state’s “mystery gasoline surcharge,” which has for years seen Californians inexplicably paying more at the pump.

“Obviously, 3 cents lower would be better than higher, but compared to the other factors driving gas prices, this isn’t the major one,” he said of the excise tax.

Friday’s increase also arrives ahead of the Fourth of July weekend, which AAA said will be the third-busiest Independence Day on record for Southern California when it comes to holiday travel. About 2.7 million Southern Californians are expected to travel by car.

“People are ready for a break, and despite things costing more, they are finding ways to take that much-needed vacation,” said Doug Shupe, spokesman for AAA Southern California.

Las Vegas, San Diego, the Grand Canyon, Mexico and Yosemite National Park are the top destinations for Southern Californians hitting the road, according to AAA.

Nationwide, more than 42 million people are expected to travel by car this weekend, the organization said.