Modern California Gas Tax & Historical Precedent

Walker Wilson:  The November 1st 2017 hike of the California excise tax on gasoline is a controversial raise in taxation on a nearly universally consumed commodity in the U.S.  Although there are many who view it as such, the tax, whether beneficial or harmful, is certainly not controversial in the sense that gas taxes have existed for almost one hundred years in the U.S.  In fact, the first state tax on gasoline was enacted in Oregon in February of 1919. That makes the current tax hike only one year short of a hundred year anniversary.

The tax was an overall success because within ten years all of the lower forty eight states also adopted gas taxes of their own. The first gas tax at a federal level occurred under the administration of Herbert Hoover along with the Revenue act of 1932. In 1932, balancing the budget took on an altogether higher significance than previously, with the economy in shambles during the depression, but using revenue from taxing gas to fund highway infrastructure was an idea that was supposed to be effective even in a time of less economic turmoil. The tax was one cent per gallon and was imposed along with the state taxes. During the term of Herbert Hoover, the government looked for any available source of additional funding, but in our modern era, extra infrastructure funding is also greatly needed. Balancing the federal budget has become increasingly difficult with more threats of government shutdown and an increasing budget deficit. This makes it at least worthwhile to explore new sources of funding, or in this case, to re-examine existing ones.

The most recent grade given by the American Society of Civil Engineers to America’s infrastructure was a D+. Roads in particular also scored a D. With a large deficit and urgent repairs needed, many see the gas tax as a convenient way to fund much needed repairs. This can be especially attractive when one doesn’t want to divert funding from other sources. Other reasoning behind raising the gas tax is based on the idea that the tax is meant to compensate for the costs associated with using fuel products, such as air pollution, while those who oppose raising the tax are primarily concerned with the extra costs it will incur to consumers. While the cost to consumers should not be taken lightly, the U.S consumer on average pays less than consumers in other industrialized nations. According to OECD data on consumptive tax trends, out of industrialized nations only Mexico pays a lower gas tax, because it pays none at all. While the overall effect of the current raise in the gas tax has yet to be determined, it is safe to say that the idea of a gas tax is nothing new, and an occasional raise of the rate is something we should become accustomed to hearing proposed for as long as we continue to use these products.

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