man pumping gasAccording to Statistica reports, there were approximately 14.5 million vehicles registered in the state of California in 2016. For all those vehicle owners, filling up with gas is an unavoidable reality, regardless of the price or how high the gas taxes are. What many people wonder is exactly where the gas tax dollars are going and if they are, indeed, being spent on transportation and road infrastructure improvements as many politicians promise at campaign time. The current measure to revoke California’s gas taxes is a hot issue on the upcoming November ballots.

How Much of the Gas Tax Goes Towards Paying Transportation Services?

Maintaining and improving transportation infrastructure is a complex and costly endeavor. Road repairs, highway and rail maintenance are issues that affect most state residents. Unlike many political issues that only affect certain segments of the populace, gas taxes, registration, and transportation services impact a large portion of the state’s population.

According to the Legislative Analysts’ office, drivers pay approximately $750/year in fees and transportation taxes to the state. This estimate includes the taxes aimed for recall: 12-cent increase/gallon of gas, 20-cent increase/gallon of diesel, and the recent registration fee increases.

Where the Taxes and Fees are Delegated

Beginning on July 1st, the proposed state budget for the fiscal year is expected to produce over 16 billion dollars from gas and diesel taxes, truck driver weight fees, and license and registration fees.

According to the Department of Finance, the percentages of that amount are allocated as follows: 59 percent to highway maintenance, road repairs, and public transit. 22 percent goes to state agencies, such as the DMV and CHP, that are in charge of traffic law enforcement and regulation. Less than 3 percent goes to state administration costs of distributing, auditing, and collecting the gas fees and taxes. The smallest portion goes towards environmental issues such as vehicle emissions, research, workforce programs, and pedestrian/cyclist necessities.

Approximately 7.5 percent goes to paying down debt related to transportation issues. There are an additional two types of fees and taxes that make up 7.5 percent of the total sum that is collected from motorists by the DMV and the state of California that are not allocated directly to transportation amenities; these funds are redirected to local law enforcement and further allocated to the state of California’s general fund, the department of Food and Agriculture, and Parks and Recreation.

How Gas Fees and Taxes are Protected

Historically speaking, diesel and gas taxes have been protected by the state constitution under which they are designated to solely fund transportation services. But according to Michael Coleman, fiscal policy adviser, the legislature has been permitted to borrow from the funds in times of fiscal crisis. Voters want to know that their gas taxes are strictly being used for what they were originally intended: transportation services. The passing of the Proposition 69 ballot reflects the public’s prioritizing of transportation services funded by new gas fees and taxes (SB1). What this means is that it is much harder to divert money away from transportation services than it used to be.

Gas Tax and Inflation

An interesting question is where exactly the State of California’s gas tax would be if it was subject to regular increases due to inflation? As the gas tax was created as a per-gallon tax, it is not subject to percentage increases. According to the U.S. Department of Labor, California’s gas tax, first applied in 1923 at 2 cents/gallon, if adjusted to reflect current rates of inflation would be 30 cents/gallon.

As a large majority of California state residents are impacted by the gas taxes and registration fees imposed at the state and federal level, it is only natural to question where exactly those dollars are being allocated. Thanks, in part, to the passing of the Prop 69 ballot, these funds are distributed more closely in line with what they were intended for: transportation services.

Private Tax Debt Collection Heavily Impacts the Poor

Many citizens might be unaware that the IRS has begun to farm out the task of collecting back taxes to private tax-debt collectors. Furthermore, it seems that the taxpayers who are least able to make payments are the ones being targeted by the...

How to Avoid Owing Money on Your 2019 Tax Returns

With the passing of the Tax Cuts and Jobs Act (TCJA) in 2017 came the expectation that the majority of taxpayers would be getting a tax break. Despite that expectation, the General Accounting Office (GAO) is cautioning tax payers to pay extra...

How California’s Tax Laws May Hold Back Its Housing Market

You certainly don't need a tax attorney to tell you that property has become very expensive across southern California and the Bay Area. Numerous explanations have been offered  as to why property prices are soaring, but the truth may be found...