Effective Nov. 1, California diesel tax rate will more than double

October 27, 2017

Keith Goble


The first of November marks the start date for significant changes in fuel tax collections in California.

Currently, the excise components making up the tax rates are 27.8 cents for gas and 16 cents for diesel.

As of Wednesday, Nov. 1, the excise rate on gas will increase by 12 cents to 39.8 cents. Another round of increases will take effect in July 2019. At that time, the gas rate will be raised 7.5 cents to 47.3 cents.

Also effective the first of the month, the excise rate on diesel will jump by 20 cents to 36 cents.

The excise rates on gas and diesel also will be adjusted for inflation beginning in July 2020.

The rate increases are one component of a 10-year, $52 billion transportation funding deal signed into law earlier this year by Gov. Jerry Brown.

The Democratic governor and leading lawmakers of his party have championed the funding plan to raise an estimated $5.2 billion annually for state and local roads, trade corridors, and public transit.

The funding package includes a mix of higher taxes and fees. It is described as a “first step” toward making roadways safer and providing a boost to the state’s economy.

Previously SB1, the new law is estimated to raise nearly $3.8 billion annually mostly via increases in the gas and diesel tax rates.

In addition, the state’s 1.75 percent sales tax applied to diesel purchases is increasing by 4 percent to 5.75 percent. The increase is estimated to raise $3.5 billion over the next decade.

Revenue from the diesel sales tax increase, however, will not directly benefit trucking. The money will be deposited into an account for transit and intercity rail projects.

Additional components in the funding plan increase annual vehicle registration fees up to $175 and apply an annual $100 fee for zero-emission vehicles. The fees will raise $1.3 billion.

The fee rates will increase on Jan. 1. All rates will be indexed to inflation to allow for increases in future years.

Ballot efforts
Passage of SB1 at the statehouse was a highly contested issue. Despite failing to prevent the bill from becoming law, opponents are not going away quietly.

Multiple repeal efforts are underway by Republicans running for governor in 2018. State Rep. Travis Allen, R-Huntington Beach, has filed one ballot initiative to repeal the tax and fee increases. The effort must gain nearly 366,000 valid signatures over six months to secure its spot on the November 2018 ballot.

Fellow GOP gubernatorial candidate and businessman John Cox is backing a separate effort to include a constitutional amendment that requires fuel tax increases to be approved by voters, retroactive to Jan. 1 of this year. The initiative needs 584,000 signatures to get on the ballot.

The Attorney General’s office is expected to issue the official ballot summary and title for Cox’s effort in mid-November. At that time, signatures can begin to be collected.

Signatures are already being collected for Allen’s effort.

In the meantime, truckers will begin paying more fuel tax on Nov. 1.

‘Cap and trade’
To further complicate matters for truckers and others pocketbooks, state legislators this year also approved the extension of a one-of-a-kind program known as “cap and trade.” The program allows the California Air Resources Board to cap greenhouse gas emissions and require companies to buy permits to exceed those caps.

Cap and trade initially applied solely to power plants and other heavy manufacturers. Since Jan. 1, 2015, the program also includes oil companies.

The program is most notable to truck drivers and because of associated fuel tax rate increases. CARB has estimated a fuel tax increase between 15 cents and 73 cents per gallon could eventually result as oil companies pass on costs to consumers.

In the past two and one-half years, the state’s Legislative Analyst’s Office found the program has added 11 cents per gallon in additional costs for gas and 13 cents more for diesel. In all, consumers are paying $2 billion more per year for fuel.

The increased tax rates associated with cap and trade are separate from the raised rates linked with the passage of SB1.

In all, truckers will soon be paying at least 33 cents more per gallon of diesel than they did less than three years ago.