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No Silver Lining For California In Gas Price Surge

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Aired 4/20/11

California won't see a huge tax windfall from rising prices this year. In fact, a state tax collecting change could end up costing the state money at the pump.

California tax collectors raked in more than a billion dollar windfall the last time gas prices surged up over $4. However, California lawmakers have changed the equation.

California Gas Tax
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Above: California Gas Tax

In a tax-swap passed as part of last year's budget, the state stopped collecting sales tax on gas and doubled the per gallon excise tax. The move was supposed to be revenue neutral, but the current price surge may mean people will buy less gas.

"Certainly excise tax is based on per gallon and sales, so if sales decline then the excise tax take would be less," said Anita Gore of the California Board of Equalization. The Board tracks taxes collected on every gallon of fuel sold in the state.

Current gas sales numbers will only be released in a few months.

California taxes gasoline two different ways. The state charges an excise tax on every gallon sold and then local sales taxes on the amount of the total sale.

Last summer, state lawmakers eliminated a 6 percent sales tax, and nearly doubled the 18 cent per gallon tax.

That will eliminate the chance of a tax windfall based on the price of a gallon of gas. That windfall was huge when the last gas price surge began in 2007.

"In 2007 the tax was based on a $3.12 a gallon price, and in 2003 the price was about $1.88 a gallon," said Gore. The price of gas peaked in the summer of 2008.

California's tax bite could shrink this year, if high prices reduce consumption like they did four years ago.

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