State pumps brakes on diesel excise tax

Through the new state budget, gasoline excise tax increases from 51 to 54 cents per gallon, accounting for $8 of the $92 it costs to fill a 15 gallon gas tank

SACRAMENTO – As California leads the country with the highest average gas prices, the 2022 California State Budget has offered some solutions, but not for all.

This year’s budget offers a broad-based relief package that pauses a portion of the sales tax rate on diesel fuel. This puts the brakes on gas tax increases for some Californians starting in October. While there’s a pause for diesel, the state’s gasoline fuel tax will still go up by three cents per gallon. 

“The budget does suspend the 23 cents per gallon sales tax on diesel for a full year,” Assemblyman Adam Gray (D-Merced) stated in a press release. “This tax holiday will primarily benefit blue-collar workers and help combat the rising prices of consumer goods transported by trucks including California-grown fruits and vegetables.”

As gas prices continue to increase, legislators are trying to find different ways to provide consumers relief at the pump, but there are several costs that go into the overall price of one gallon of gas. 

According to the United States Energy Information Administration, one gallon of gas in May was 59% of a gallon of gas accounts for the cost of crude oil. For diesel it is 47%. The cost for refining accounts for 26% of a gallon gasoline, and 25% of a gallon of diesel. Distribution and marketing accounts for 5% of a gallon of gasoline and 17% of a gallon of diesel. And taxes account for 11% of a gallon of gasoline and 10% for a gallon of diesel.

As the state passed its budget, the excise tax of per gallon of gasoline increased from 51 cents to 54 cents per gallon of gasoline. According to the American Automobile Association (AAA) the average passenger car gas tank holds between 14 and 15 gallons. Which means the excise tax for a 15 gallon gas tank accounts for $8 of the total $92 it costs to fill the tank at $6.14 a gallon. 

According to the California Energy Commission (CEC), there are seven different costs that go into making the price for one gallon of gas. As of June 27, the average cost for a gallon of gas in California was $6.14.

The largest portion of a gallon of gasoline comes from the cost of crude oil at $2.77 per gallon. The second largest portion of a gallon comes from refinery cost and profit, which is costing the consumer $1.73 per gallon. The CEC website defines refinery cost and profits as costs that are “associated with refining and terminal operations, crude oil processing, oxygenate additives, product shipment and storage, oil spill fees, depreciation, purchases of gasoline to cover refinery shortages, brand advertising, and profits.”

Under that cost, 79 cents of each gallon is for distribution and marketing costs and profits. This includes costs associated with distribution and retail like franchise fees, rent, wages, utilities, supplies, environmental fees, licensing, credit card fees insurance etc. 

The federal excise tax is currently accounting for 18 cents per gallon. The state and local taxes vary throughout the state, but CEC’s average cost per gallon is 2.25% which equates to 14 cents per gallon. In addition to all other costs, each gallon of gas provides 2 cents to state underground storage tank fees.

Along with the diesel tax holiday and gasoline increase, the state budget is putting into effect rebates for Californians called the Better for Families Tax Refund. 

“The budget also includes critical tax rebates to individuals and families of up to $1,050,” Gray said. “These payments are long overdue.”

According to the budget summary, this refund program will return an estimated $9.5 billion to taxpayers. Over 17 million California families will receive funding to help offset rising prices of gas, food and other necessities due to record inflation. Payments will go to 97.5% of tax returns for those who are not claimed as dependents. Almost 86% of payments are estimated to go to single filers earning up to $75,000 and joint filers earning up to $150,000.

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