Increased Supply Lowers Prices More Than Gas Tax Repeal
California Assemblyman James Gallagher is one of the architects of The California Promise, a six point set of political priorities unveiled by the state’s Republican Party in October. First among these is “An Affordable California,” and first in that category is “Repeal Gas Tax.”
To emphasize this priority even further, on the top of the Assemblyman Gallagher’s home page a counter has been installed, showing how long it’s been “Since Newsom & Democrats Promised Gas Tax Relief.” As of this moment on the afternoon of December 8, that’s 274 days, 19 hours, 25 minutes, and 15 seconds.”
It would be great to have a gas tax holiday in California. It is a regressive tax that adds, per gallon, 54 cents in state excise tax, 23 cents for California’s cap-and-trade program, 18 cents for the state’s low-carbon fuel program, 2 cents for underground gas storage fees, plus state and local sales taxes. Altogether this equals, not including another 18.4 cents in federal excise tax, and give or take a few cents depending on local sales tax rates, $1.20 to the price of every gallon of gasoline you buy.
Nonetheless it is a mistake to put so much emphasis on a gas tax repeal. At a time when California’s much vaunted budget surplus has suddenly morphed into an estimated deficit of at least $25 billion in the next fiscal year, what was already a hard sell becomes impossible. Try to stop taxes from going up even further. For now, that will do.
Meanwhile, instead of focusing on eliminating taxes, why not focus on lowering the cost of goods that are being taxed?
For example, in 2017, when state gas taxes and fees already amounted to nearly $1.00 per gallon, you could purchase gasoline in Los Angeles for $2.86 per gallon. In 2015, gasoline prices were down as low as $2.58 per gallon in California. Instead of repealing the “gas tax,” which even if repealed would only apply to the state excise tax of $.54 cents per gallon, and would not take away the rest – the cap-and-trade fee, the low-carbon fee, the underground storage fee, or the sales taxes – why not focus on increasing production and thus increasing competition? Wouldn’t that lower prices?
Put another way, if lowering the cost-of-living, starting with gasoline, is a priority, why not fix the economic conditions that have in only five years accounted for over $2.50 per gallon of increased cost per gallon to the consumer, instead of the gas tax, which at best might take $.54 cents out of the cost per gallon?
Even more to the point, if this is all symbolic posturing on the part of the California GOP, which it most certainly is, and if the purpose for all this posturing is to expose the elitist disregard California’s Democrats have for normal hardworking Californians, then why not advance broader principles that voters, everywhere, might not only connect to why their gas is so expensive, but to why everything is so expensive?
California is not unaffordable because taxes are too high. The high taxes, and they are too high, only add insult to injury. The economic factors breaking Californians, however, are that Democrats have regulated the economy to a standstill, creating scarcity and driving up costs.
The real reason housing is unaffordable in California, to cite an example even more painful than the cost of gasoline, is because of California’s neglected water, energy, and transportation infrastructure, its decimated timber industry, its offshoring of the sources for every necessary building material, its punitive policies of urban containment, its protracted, capricious, and extortionate process to obtain building permits, and its ridiculously overwrought building codes.
All of this was engineered by Democrats. Unaffordable housing, along with unaffordable gasoline, is the result of political choices made in a one-party, Democrat ruled state. That is the message Gallagher and his fellow republicans need to send to voters.
California, of all states, is literally floating atop stupendous reserves of oil and gas. In the 1980s, California field production of crude oil per day stood at over 1.0 million barrels. Today, production is down to 330 thousand barrels per day. This despite the fact that onshore and offshore reserves of oil in California total an estimated 15 billion barrels. If there is any place on earth where these resources could be responsibly extracted, it’s here in California. But instead we send jobs and dollars to petro-dictatorships around the world.
There’s no good reason for this. In 2021, foreign suppliers accounted for 56 percent of the oil refined in California. The entire energy strategy of California’s state legislature is flawed. Simply mandating a phase in of increasingly advanced hybrid vehicles could allow the state to maintain its desired downward trend in oil consumption. This would take pressure off the state’s utilities to double production of electricity – something they have absolutely no idea how to accomplish while conforming to “renewables” mandates.
California’s Republican state legislators, who as of 2023 will account for a mere 27 out of 120 seats, cannot possibly expect to push through legislation opposed by Democrats. But they do have an opportunity to make a lot of noise, and they have very little to lose. They should be demanding, if anything, that California’s refineries apply their windfall profits to increasing capacity. They should be demanding and defining policies that will offer a roadmap to energy companies once again drilling here in California for more oil and gas. When supply rises, prices fall.
Publicly challenging fundamental premises of the Democrats, starting with their faith-based, utterly irrational belief that we can precipitously eliminate consumption of oil and gas, should be the mission of Republicans in Sacramento. GOP politicians should be openly defying the absurd premises that Democrats pass off as gospel, instead of trying to creatively navigate within their parameters.
At the same time, California’s GOP politicians should be espousing the principle of competition through deregulation as the only way to make California affordable again, because that’s the unassailable truth. Lowering one tax, temporarily, merely invites accusations – not entirely unfounded – of indifference to deficits. Lower spending, then lower taxes. But since you can’t do either, shout louder, hit harder, and aim for the heart, not the hair.
This article originally appeared in Epoch Times.
Edward Ring is a contributing editor and senior fellow with the California Policy Center, which he co-founded in 2013 and served as its first president. He is also a senior fellow with the Center for American Greatness, and a regular contributor to the California Globe. His work has appeared in the Los Angeles Times, the Wall Street Journal, the Economist, Forbes, and other media outlets.
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