By Jon Coupal | The COVID-19 pandemic has upended our lives by putting our health at risk, disrupting our work lives and robbing us of most of our recreational activities. It has also evaporated all of our assumptions about transportation policy in California.
First, in one of the few positive consequences of the pandemic, California’s highest-in-the-nation cost of gasoline is way down. In October of last year, the average per-gallon price of gas in California was $4.18. Today it is $2.72. Naturally, no one could have anticipated the crash in the oil market because of rapidly diminishing demand. The low price of gas would be a cause for celebration if it were not for the fact that most are having to shelter in place at home.
Second, while the price of gas is down, the excise tax is not. Thanks to the 2017 gas tax hike of 19 cents per gallon, California now has 58 cents per gallon of gas taxes, 76 cents when the federal excise tax is included. Gas tax proponents argue the funding is necessary for road projects, but with the sudden onset of double-digit unemployment, a cut in the gas tax would be welcome relief for those who need to drive every day.
Third, the coronavirus is likely to sharpen the debate over whether gas taxes are a reliable and stable source of revenue to begin with. One of the justifications for the gas tax hike in 2017 was the decline in revenues due to more fuel-efficient vehicles at the same time vehicle miles traveled were increasing. The coronavirus is likely to accelerate this trend as high-risk individuals travel less frequently and those who can, work from home. Will this increase the push for a vehicle-miles-traveled tax as a replacement tax for the excise tax? Implementation and privacy concerns suggest that shift will not be rapid assuming it happens at all.
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