Will California suspend its gas tax? Debate over fuel costs rages on as Biden weighs in

California legislators have been at odds over suspending the state’s gas tax for months, but a presidential call to action and growing Democratic support is adding energy to the movement to cut fees at the pump.

President Joe Biden on Wednesday proposed that Congress to suspend the federal gas tax for three months and for states to “take similar action to provide some direct relief, whether suspending their own gas taxes or helping consumers in other ways.”

California’s gas excise tax — which funds road and infrastructure repairs — currently costs drivers 51 cents per gallon and will rise to 54 cents in July. The federal gas tax is 18 cents per gallon for regular gasoline.

The Golden State is home to the country’s highest gas prices. The statewide average on Thursday was about $6.36 per gallon, while the national average was at $4.94 per gallon, according to AAA.

Although legislative leaders continue to push against suspension, some Democrats are joining Republican lawmakers in advocating for a break while fuel costs are hitting consumers the hardest.

Some Democrats support gas tax relief

For some time, a handful of legislative Democrats have suggested they would support some form of gas tax break. That number grew on Wednesday.

In late April, a handful of Democrats, including Assemblyman Tim Grayson, D-Concord, and Assemblyman Carlos Villapudua, D-Stockton, joined a group known as the “California Problem Solvers Caucus” to support a 12-month gas tax suspension that would require retailers to pass cost savings along to consumers.

On June 17, some Democratic Assemblymembers also pushed to suspend the 3-cent gas tax increase that will take effect on July 1, even though legislative leaders already declined to do so in advance of the May 1 deadline.

On Wednesday, Assemblyman Rudy Salas Jr., D-Bakersfield, in the midst of a congressional campaign, announced he plans to hold a Friday press conference in his district to call for a gas tax suspension.

Assemblyman Robert Rivas, D-Hollister, also praised Biden, although he stopped short of supporting a California version of the tax holiday.

Rivas has made moves to take over the Assembly Speaker role from Assemblyman Anthony Rendon, D-Lakewood, and is still campaigning for the job.

“All Californians deserve relief at the pump now!” Rivas tweeted. “I applaud @POTUS for calling on Congress to pause the federal gas tax. This is an important first step to lowering gas prices, but we must do more to provide immediate, direct relief.”

Gas tax suspension debate

California Republicans have spent months pushing legislative leaders to support suspension of the state gas tax and backfill the lost revenue with general fund dollars.

But Rendon and Senate President Pro Tem Toni Atkins, D-San Diego, are steadfastly opposed, saying there’s no guarantee fuel providers would pass the savings on to consumers.

Rendon on Monday argued that a tax holiday could hurt workers performing road construction paid for with state transportation dollars allocated through Senate Bill 1, which raised the fuel tax in 2018.

“I think what’s important in terms of thinking about a gas tax holiday is to consider the extent to which that would make things worse for people who’d be laid off, who would not have jobs because of the construction aspects related to SB 1, for example,” Rendon said. “You have to ask yourself the extent to which gas companies would continue to pocket those profits.”

However, Rendon and Atkins are still in negotiations with Gov. Gavin Newsom over their idea for relief — money sent directly to Californians to help pay for gas or other necessities.

Legislative leaders want to send $200 to all taxpayers earning $125,000 or less per year, with additional $200 payments for dependents. Newsom wants to give $400 to vehicle owners, capped at $800 for two vehicles.

In the meantime, Rendon also formed a select committee to investigate the state’s inordinately high gas prices.

‘Gas prices are an emergency’

Attempts to suspend the gas tax aren’t new.

On Wednesday, California legislative Republicans marked the one-year anniversary of their first call for gas tax relief by unveiling a new website critical of Democratic lawmakers.

State Sen. Brian Jones, R-Santee, who chairs the Senate Republican Caucus, said that Sacramento Democrats are being “greedy and somewhat arrogant” by not supporting a break.

“And just because Republicans in California are the ones making the most noise about it, that doesn’t mean it’s partisan,” Jones said.

Jones pointed out that Democratic-controlled states like New York, Maryland and Connecticut also have suspended their gas tax.

The caucus chair said that if Democrats were serious about helping people, they could move quickly on suspension, much like they rushed a California Environmental Quality Act exemption to passage in a matter of days earlier this year. Thousands of prospective UC Berkeley students faced the prospect of being denied admission to the university unless construction of new housing was expedited.

“That wasn’t an emergency. Gas prices are an emergency,” Jones said.

An adjustable gas tax?

One expert has also suggested a different kind of gas tax suspension — one that would apply only when oil prices are high. When prices dropped, the tax would go up.

This kind of tax would provide drivers with some relief when gas prices are at their height. It would also discourage over-consumption of fossil fuels when costs are lower, said Severin Borenstein, faculty director of the Energy Institute at UC Berkeley.

“This tax would disappear when crude oil prices are high, just as the tax suspension advocates are now calling for (though some of the savings might still go to producers),” Borenstein wrote in his Energy Institute blog. “And it would ratchet up as the price of crude oil drops, putting a break on the inevitable tendency to jump back into beefy SUVs, as those of us who are worried about climate change fear. A win-win.”

In his blog, Borenstein acknowledges there are issues to consider, including how to set the oil prices that would trigger tax changes, how often those changes would happen and “how to deal with border issues if the tax is way out of line with neighboring states.”

But he told the Sacramento Bee he thinks it’s a “completely doable plan for this budget cycle.”

“I think they’re not seeing there’s a middle ground here that would really give everyone something they want,” he said.

This story was originally published June 23, 2022 at 5:00 AM.