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More Pain at the Pump: California Gas Tax Increase Goes into Effect

AP Photo/David Zalubowski

While the nation has been reeling from record-high gas averages, it's about to get even worse in California, which already has the highest gas prices in the country. Other states are engaging in a gas tax holiday, or at least considering it. But on Friday, the gas tax just increased in California, where it will cost an extra 3 cents a gallon. 


According to AAA gas price averages, the average price of gas for July 1 is $4.842 per gallon. In California, it's at $6.270, several more cents higher than the next highest, which is Hawaii, at $5.612. 

NBC Bay Area said that the annual gas tax in California, which is among the highest at 51 cents a gallon, is to pay for infrastructure projects: 

The state uses the gas tax to fund different highway and road projects. Proponents argued keeping the increase, so, those projects can continue.

Some economists said the increase comes at a bad time. 

“So, the problem isn’t that the gas tax is itself an overwhelming indignity, it’s that it comes on top of a whole series of indignities. There are a whole bunch of problems with the economy,” said Robert Chapman Wood, SJSU Global Economics Professor.

What the report doesn't mention, though, is that the pain is the point. In April, a report from the Urban Center offered, "To Ease Pain at the Pump, Help People Avoid the Pump." 

Sure enough, one bullet point reads: "Gas consumption is bad for the climate. Driving should be discouraged, not subsidized. One-fifth of global carbon dioxide omissions [sic] come from transportation, most of it from road vehicles." 

The Congressional Leadership Fund (CLF) blamed Democrats in California running for Congress, noting that Assembly members Rudy Salas and Adam Gray had the chance to suspend the gas tax but were among those who voted against it. And while Jay Chen claims to be "committed to lowering costs for working Americans," he hasn't spoken out against the gas tax increase. 


"Families are struggling to keep up with record-high gas prices and California Democrats are making it even worse," said CLF Press Secretary Cally Perkins. "Californians have the highest gas prices in the nation and have only Democrats to blame for it." 

The NBC affiliate also reported that the gas tax increase goes into effect on Friday, after Gov. Gavin Newsom, the state's Democratic governor, signed the state budget into law on Thursday, approving relief checks. 

The piece quotes residents who would rather have a suspended gas tax, though: 

Millions of taxpayers will receive payments of $350, $250 and $200 depending on how much money Californians make. And it could be up to $1,050 if California residents have children.

Drivers NBC Bay Area spoke to on Thursday were mixed on it.

“I would prefer to have the gas tax lower and then skip the rebate,” Guinn said.

“Not only because of Ukraine and gas prices, but I feel like gas prices also went up because of the stimulus checks we were getting. For me, I’m happy we got the money and everything, but that really did raise up the prices for a lot of things,” Roach said.

While the gas tax goes into effect on Friday, taxpayers won't receive their relief checks until some point between late October and January. 

Further, a report from the Sacramento Bee detailed how "Experts warn California's 'inflation relief' could actually send high prices even higher."


According to the report: 

The “inflation relief” package championed by Gov. Gavin Newsom and Democratic legislative leaders could have the opposite effect, pushing inflation — now at its higher level in 40 years — even higher, top economists say.

“One-off tax holidays or rebates which put more money in people’s pockets without doing anything to boost supply are inflationary,” said Jared Walczak, vice president of state projects at the Tax Foundation, a Washington-based research group.


The Bee contacted economists familiar with California. All but one saw the plan as having the possibility of adding to inflation. 

“Any increases in government spending will generally increase inflationary pressures,” said Michael Shires, associate professor of public policy at Pepperdine University.


Walczak understood that temporary relief is politically popular.

“With states sitting on large surpluses while consumers struggle under the burden of high inflation, the political appeal of rebate checks and tax holidays is understandable,” said Walczak.

But he said, “these policies do nothing to solve the underlying problem, and they are poorly targeted as relief for those who need the help most. “

It's worth reminding, as even Democratic economists had warned, that when Congress tried relief checks at the national level with the American Rescue Plan Act in March of last year, such a move led to higher inflation. 


Gov. Newsom touted the budget on Twitter, which included mocking the pro-life movement, something he's frequently done as he looks to make California an "abortion sanctuary." 

A pinned tweet from the governor's office celebrates, "We're putting money back in your pockets!" without mentioning it won't get there for several months, and even claims such money could "help with global inflation & rising costs." 

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