The California Tax on Gasoline Was Not the Best Solution

The California Tax on Gasoline Was Not the Best Solution

California repeatedly warned about spiking gas prices, fragile supply. But fixes never came

California recently had its worst quarter ever for the energy industry, and with the price of gasoline hitting a record high in the last three weeks, the state’s policymakers faced the daunting task of solving what could become a crippling problem. What could be done? How could lawmakers at the Capitol in Sacramento find the will to enact the necessary changes? Some ideas were floated, but these simply fell apart, leaving the problem unresolved. And with the energy industry experiencing one of its periodic droughts, the state’s leaders saw the opportunity for additional savings.

The state’s energy crisis, it had been suggested, could be solved by imposing a tax on all gasoline in the state. California could have an excise tax on all gasoline at the pump like Massachusetts has; instead, the state opted for what a state legislative analysis called “a less disruptive approach,” and, as one state senator put it, “a more appropriate fix.”

The suggestion that California tax gasoline at the pump was perhaps the most creative idea that the Legislature heard. It was also the least practical approach to solving California’s crisis. And it was quickly rejected by lawmakers who were tired of losing their elections on issues of energy.

The tax on all gasoline was intended to accomplish a couple of things: it would offset the state’s energy bill, which was already relatively low compared with national average; and it would be a relatively small tax — one that would not have a drastic enough impact on consumers to threaten the state’s credit rating and the state’s economy as a whole. But the most critical problem was that the revenue raised by the tax could be used only to offset the bill; the tax money for one of the world’s largest oil and gas producers could not be used to help the state meet its other critical needs, like paying for vital services such as education and health care, and paying for a rainy day fund.

The tax also made no provision for how to pay its bill, which could be devastating to the state’s credit rating, which was already shaky, and to the state’s economy. The tax raised no revenue, meaning the state had no money to spend

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