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Economy

California gas tax holiday would split benefits between consumers, oil companies

High gas prices are posted at a gas station in Beverly Hills, Calif., on Nov. 7.
KPBS
People fuel up at a gas station in San Diego.

Democrats in the California Assembly on Thursday unveiled a proposal to give all California taxpayers $400 checks to help ease the burden of soaring gas prices.

The plan is a counterpoint to a proposal from Republicans to offer motorists a six-month reprieve from the state's gas tax. An attempt by Assemblymember Kevin Kiley (R-Rocklin) to force a swift vote on the proposal failed Monday, though he has vowed to keep pushing the idea.

California gas tax holiday would split benefits between consumers, oil companies

California's gas tax is roughly $0.51 per gallon, so $400 would be the rough equivalent of a one-year gas tax holiday for a motorist who fills a 15-gallon tank once a week.

Democrats opposed to the gas tax holiday say the GOP plan would leave out Californians who are too poor to own a car but are nevertheless struggling to cope with inflation. The $400 payments, they argue, will help all Californians regardless of how they get around.

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"It'll go far in helping with price increases not only at the pump, but also at the grocery store and on our utility bills," Assemblymember Jacqui Irwin (D-Thousand Oaks) said at a press conference Thursday. "Californians are hurting and they need relief."

Another argument Democrats make is that giving taxpayers extra cash would ensure all the money goes directly to consumers and isn't siphoned off by oil companies. And there is evidence to suggest they are right.

Economists did a study of gas tax suspensions in Illinois and Indiana during a price spike in 2000. They found that roughly 70% of the savings were pocketed by consumers while the remaining 30% was kept by gas producers.

UCSD economics professor Mark Jacobsen said California drivers would likely see an even smaller share of the savings from a gas tax holiday.

When Illinois and Indiana suspended their gas taxes, he said, demand for gas spiked. Normally that would push prices upward again — but neighboring states were able to send more gas to the two states to meet the higher demand.

California gas tax holiday would split benefits between consumers, oil companies

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California, however, has higher gasoline purity standards than neighboring states, and there are not as many oil refineries able to produce gas that can be sold here. It would be more difficult for gas producers to flood the state with new supply, Jacobsen said, meaning that any drop in gas prices would be much less than $0.51 per gallon.

"I would think at least 30% (of the savings), probably way more in the case of California, would go to producers," Jacobsen said. "If you just write checks, 100% of that goes to consumers."

Gov. Gavin Newsom vowed in his State of the State address last week to offer Californians some kind of relief from high gas prices, though his office has not yet given details. Assemblymember Cottie Petrie-Norris (D-Irvine), who is spearheading the $400 tax rebate proposal, said she hoped to strike a deal quickly enough to get the money out this spring.

"We have had some conversations with the governor's office," Petrie-Norris said. "(We are) really looking forward to seeing their proposal and continuing to work with the governor, with leadership and with our colleagues to very quickly get money into the pockets of Californians."

Senate President Pro Tem Toni Atkins (D-San Diego) said in a statement that she is also committed to working with the governor and lawmakers to offer Californians some kind of assistance.

"With equity in mind, this will provide much-needed financial help, especially for lower and middle-income families, while not impacting funding that is vital to our schools and infrastructure, or family-supporting construction jobs," Atkins said.

  • Dueling proposals from Democrats and Republicans in the California legislature aim to provide relief from soaring gas prices. Meanwhile, funding is on the way for mental health treatment for San Diego’s health care workers.
  • The Federal reserve made a move yesterday to cool down the inflationary spiral that’s made gas, food and housing prices spike by raising the rates banks use to lend money to each other.