California Leaders Plan Tax Hikes to Fix Roads

Daily Tax Report: State provides authoritative coverage of state and local tax developments across the 50 U.S. states and the District of Columbia, tracking legislative and regulatory updates,...

By Laura Mahoney

California’s Democratic leaders want to fix roads and bridges with higher gasoline taxes and a new fee on electric vehicles that would raise $5 billion a year.

Gov. Jerry Brown (D) announced an agreement with Democrats in the Senate and Assembly at a March 29 news conference, and said they plan to enact the package April 6. The lawmakers were surrounded by local government officials, labor and business representatives who support the agreement.

“Even in Washington, they’re talking about a trillion dollars in roads and public infrastructure,” Brown said. “This is $52 billion over 10 years. This is probably more than 50 percent of what we should be spending as our share of the national program.”

Republicans Opposed

Republican lawmakers are opposed to the plan because it includes tax increases. They have introduced their own plan that would direct existing state funds to transportation projects.

“What we’re going to continue to keep doing is fighting for working Californians to make sure that they’re not going to have to pay any more taxes,” Assembly Republican Leader Chad Mayes told reporters after the governor’s news conference.

Democrats have two-thirds majorities in both houses of the Legislature, allowing them to approve tax increases without support from Republicans.

The plan touted by Brown and the Legislature’s Democrats would:

  •  Increase the diesel excise tax by 20 cents a gallon.
  •  Increase the diesel sales tax by 5.75 cents a gallon.
  •  Increase the gasoline excise tax by 12 cents a gallon.
  •  Levy a new, annual transportation improvement fee on all registered vehicles based on their value.
  •  Levy a new $100 annual zero emission vehicle fee starting in 2020.
  •  Shift money that was moved to the state general fund back to its intended purpose of funding transportation projects.

State, Local Split

About $52.4 billion would be spent on transportation projects in the next 10 years, with the funds evenly split between state and local construction. Projects on the list are as varied as fixing local potholes, investing in public transportation, repairing highways and improving trade corridors.

Brown and legislative leaders said the state’s gasoline tax hasn’t increased in 23 years. If California doesn’t invest in infrastructure repairs now, it will cost eight times as much to fix later, they said.

“This is like fixing the roof on your house,” Brown said. “If you don’t fix the leak your furniture will be ruined, your rug will be destroyed, the wood will rot.”

Constitutional Amendment

The plan will be amended into S.B. 1 by Sen. Jim Beall (D). Lawmakers can approve most of the plan with legislation, which is scheduled for a vote in both houses April 6. They also will work to place a measure on a future statewide ballot to amend the state Constitution to require the revenue be spent on transportation. They want to prevent future legislatures from shifting the money to other uses.

A coalition of groups called Fix Our Roads backing the plan includes the California League of Cities, California State Association of Counties and the California Alliance for Jobs, which itself is a coalition of labor unions, contractors and builders.

The California Chamber of Commerce also supports the package.

“Raising additional revenues for transportation will not be an easy vote when the time comes, but doing nothing will only ensure deterioration in the system necessary to move people and goods,” CalChamber President and Chief Executive Officer Allan Zaremberg said in a news release.

To contact the reporter on this story: Laura Mahoney in Sacramento, Calif., at LMahoney@bna.com

To contact the editor responsible for this story: Paul Hendrie at pHendrie@bna.com

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