California’s gas tax cut will reduce highway funding, won’t mean cheaper pump prices

Updated Feb 27, 2015

fuel pumpThe California State Board of Equalization voted to reduce the state’s gasoline tax to 30 cents per gallon from 36 cents, a change set to be implemented in July, according to an Associated Press report.

The tax cut reportedly will not cause the price of gas to go down for consumers, but the California Department of Transportation says it will reduce road funding in the state by and estimated $868 million.

The members of the board cut the rate because they anticipate lower gas prices, and if they had not dropped the tax, then there was the chance of over collecting of taxes.

The situation is convoluted due to a deal made to close the 2010 budget deficit, the report stated. The previous tax was set in order to collect the same amount of funds as the previous sales tax system would have collected.

One member of the board said the current system is irrational and that “clarity of tax is essential for taxpayers.”

The original tax cut recommendation was 7.5 cents, but the board decreased that amount because of a recent rise in gas prices.