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Gas Tax Drops, Prices Stay the Same

State wants more control of tax money

By Consumer Bob
|  Wednesday, Jun 30, 2010  |  Updated 8:44 PM PDT
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Gas Tax Drops, Prices Stay the Same

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California changes the way they tax a gallon of gas.

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Gas Tax Drops, Prices Stay the Same

California is lowering gas sales taxer, but that doesn't mean you'll pay less at the pump. Source: Gas Tax Drops, Prices Stay the Same | NBC San Diego
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California is lowering gas sales taxer, but that doesn't mean you'll pay less at the pump.

California is "swapping" the taxes drivers pay so it can have more control on how it uses the money. California voters agreed to use state sales tax money for mass transit and highway construction, but California legislators need the money to get the state out of debt.  So the plan, starting July 1, is to drop the amount of state sales tax by 6 percent and raises the flat excise tax by 17 cents per gallon.  Lawmakers can control what they do with the excise money.

"It's going to go wherever lawmakers want to put it," said consumer advocate Charles Langley with the Utilities Consumer Action Network.  "They've essentially gutted the sales tax that was dedicated to highway funding."

While the 17-cents-per-gallon excise tax should equal the previous sales tax money, it could actually earn less money for the state if gas prices go up. In fact, by lowering the percentage-based sales tax system, consumers could pay less tax if prices go up but more tax if prices drop.

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