Don’t Spend Your Gas Tax Rebate Yet . . .


Not much progress has been made in the effort to enact a gas tax rebate or gas tax holiday since lawmakers and Gov. Newsom released competing proposals last month.

Californians have been waiting for Sacramento to take action to provide relief from gas prices that, even though may have dipped from record highs a few weeks ago, are still an astronomically-high $5.69 on average as of April 20, according to AAA.

Based on the latest news from the State Capitol, drivers shouldn’t count on getting relief at the pump from lawmakers any time soon.

In his 2022-23 budget proposal, Newsom proposed suspending the annual July 1 increase in the gasoline excise tax for inflation.  The Administration estimated that the increase would be 5.6 percent in January.  But lawmakers would have to vote to make the suspension reality.

Politico reports this week that, “lawmakers would need to pass legislation by Sunday as an early-action budget item . . . (but they) have yet to introduce any legislation on the matter — despite having bill language from the governor’s Department of Finance.”

“It is clear now that the Legislature will not act in time to provide that immediate, limited relief,” Newsom spokesperson Alex Stack told Politico.

At a time when Californians are struggling to afford rampant inflation in recent months, this move appears rather tone deaf on the part of legislative leaders.  However, Newsom continues to negotiate with them separately on a push to give drivers rebate checks to mitigate rising gas prices.

There have been a few encouraging signs on that front.  First, a new analysis from S&P Global Ratings said that “temporary state gasoline tax suspensions, implemented recently by a few U.S. states, and under discussion by others, are unlikely to lead to rating changes on highway user tax-supported debt.”

“The state highway funds into which pledged gas tax revenues are deposited often have a changing mix of different revenues and tax rates, designed to match state long-term capital programs for roads and bridges, and frequently adjusted by legislatures to keep up with inflation and infrastructure needs,” S&P noted.

Californians currently pay the nation’s highest gas taxes according to the nonpartisan Tax Foundation.  SB 1, enacted in 2017, imposed a $52 billion statewide gas tax increase to pay for transportation infrastructure projects.

S&P’s new analysis would appear to alleviate the concerns of Senate President Pro Tem Toni Atkins and Assembly Speaker Anthony Rendon, who threw water on a gas tax holiday proposal in an appearance at the Sacramento Press Club in February based in part on concern over transportation funding.

“I think that’s something that could potentially jeopardize a tremendous amount of jobs in the state.  It could inhibit some economic growth in certain sectors in this state,” Rendon said of the push for a gas tax holiday. “If we’re going to halt the gas tax, we want to make sure that we have a sense of what that means to our state and to our economy.”

In other news, the San Francisco Chronicle reports that “Newsom recently outlined new details of his plan, however, that suggest he’s open to excluding the wealthiest Californians from receiving rebates, as some Democrats legislators have insisted.”  The bill language includes “a provision to potentially cap rebates for luxury vehicles valued above a set amount” that is yet to be determined.

Newsom proposed giving a $400 per rebate refund to every California car owner, regardless of income – capped at $800 for drivers with more than vehicle.  In contrast, Atkins and Rendon proposed sending $200 checks to every Californian making up to $125,000 per year for individuals and $250,000 per year for households.

Showing his apparent willingness to limit his plan based on income brings him closer to where Atkins and Rendon are.  However, it’s unclear if that brings lawmakers and the Governor any closer to a deal.  And this week’s roadblock for gas tax relief shows that until lawmakers act, whatever words emanate from Sacramento about relief from high gas prices will feel like a mirage for millions paying upwards of $6 per gallon at the pump.

Tim Anaya is the Pacific Research Institute’s senior director of communications and the Sacramento office.

Nothing contained in this blog is to be construed as necessarily reflecting the views of the Pacific Research Institute or as an attempt to thwart or aid the passage of any legislation.

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