On Thursday, February 28, 2013, the State of California’s Board of Equalization (“BOE”) voted to increase the excise taxes on gasoline by 10 percent. As a result of the 10 percent increase, gas prices are expected to increase by 3 ½ cents per gallon. The current excise tax on a gallon of gasoline is 39 ½ cents per gallon. The increase on excise tax will take effect on July 1, 2013 and expire on June 30, 2014.
In 2010, California Legislature passed a law that required the BOE to adjust the excise tax annually by March 1. The goal of the rate adjustment is to ensure that the overall state taxes paid by consumers at the gas pump remains the same as they would have incurred under the prior tax structure.
AAA reported that California has the second highest gas prices in the nation. The average cost of one gallon of regular gasoline in California increased from $3.69 last month to $4.23 this month. The increase in excise tax on gasoline resulted from a $157 million shortfall in gas tax revenue, and because it has also been projected that there will be less travelling by vehicle on the California roadways.
The revenue earned from the increase in excise tax on gasoline is expected to fund highway improvements and mass-transit projects throughout California. The BOE collects more than $53.7 billion annually in taxes and fees to support state and local government services.