As Gasoline Prices Rise, California Tax Revenues Rise, Too
FRESNO, Calif. (KSEE/KGPE) – The price of gasoline in California is rising steadily as the conflict between Russia and Ukraine continues and as oil prices rise, California’s tax revenues are also rising.
According to the California Department of Tax and Fee Administration, for every purchase of gasoline, there is an addition of 2.25% in sales tax. Considering the average gas price in California (as of Monday morning) is $5.34 according to AAA, the tax rate of 2.25% equals 12¢ per gallon of sales tax.
According to the California Energy Commission, 11,173,000,000 gallons of gasoline were sold in California in 2020. This figure can be used to estimate the amount of tax revenue generated due to rising gasoline prices.
| February 7 | 1st of March | March 7 | |
| Average gas price per gallon | $4,680 | $4.827 | $5.343 |
| 2.25% sales tax revenue | $0.1053 | $0.1086075 | $0.1202175 |
| Gallons sold in California in 2020 | 11,173,000,000 | 11,173,000,000 | 11,173,000,000 |
| Revenues generated by the gas sold | $1,176,516,900 | $1,213,471,597 | $1,343,190,127 |
Using the total amount of gas sold in 2020 as a starting point, the estimated increase in tax revenue resulting from increased gas prices is equivalent to $166 million.
Gas-specific taxes per gallon are added to the final price paid at the pump. According to the American Petroleum Institute, this 86.55¢ per gallon tax consists of:
- 51.1¢ per gallon state excise tax
- 17.05¢ per gallon of other state taxes or fees
- 18.4¢ per gallon in federal taxes
There may be some relief on the way. According to AAA, the International Energy Agency has announced a release of crude oil from the strategic reserves of its 31 member countries to help counter rising prices (because more supply means cheaper prices). It is described as the largest coordinated release since the International Energy Agency was founded in 1974.