In a state that already has some of the highest gasoline prices in the country, California Senator Darrell Steinberg (D) wants to raise them even higher with a tax hike of 15 cents a gallon in 2015, rising to 24 cents a gallon by 2020. Steinberg claims that the tax hike will help to fight global warming and help the poor by returning carbon tax revenues to “poor and middle-income families” through an Earned Income Tax Credit. The credit would apply to families with annual incomes of less than $75,000. Ostensibly, a portion of the estimated $3.6 billion dollars raised in the first year would also go to funding public transit.
In 2006, the Legislature passed former Governor Arnold Schwarzenegger’s Global Warming Solutions Act (AB 32) which put a gradually lowering cap on industry pollution emissions. AB 32 also requires industries that need to exceed the emissions cap to purchase carbon “credits” from those industries whose pollution emissions are under the cap – thus they have a pollution “credit.” This trade system is intended to be punitive on industries contributing to greenhouse gases and financially reward those industries that produce less.
This system of cap-and-trade is applied to refineries, factories and other large industries. However, if lawmaker Steinberg’s gas tax hike, which includes purchases of diesel, ethanol, oil, and natural gas is approved, it will effectively place a carbon tax on California’s car and truck drivers as well. It is implied that this will reduce driving by making it cost prohibitive which will reduce emissions, which will then help fight global warming.
In a recent speech, Senator Steinberg accused California industries of not only being polluters, but also as being wealthy and subsidized. He claimed that the poor suffer “disproportionately” from the pollution produced by these “wealthy” industries and are economically at the “polar-opposite” end of the financial scale.
The poverty level in the Golden State is the highest in the country and it is unclear how raising the cost of the fuel that consumers need to drive to work and school is going to help the poor. Nor is it clear how a gas tax hike will disproportionately protect the poor any better from pollution, whose effects would seem to apply without discrimination to all economic brackets. Some of these families may be living so far below the poverty level that they do not file tax returns and thus will not benefit from an Earned Income Credit.
Currently California’s gas tax is 71.9 cents per gallon in addition to a federal gas tax of 18.4 cents. Fuel producers will come under the stricture of AB 32 in 2015. Steinberg proposes that they should be given a pass on cap-and-trade laws and that his gas tax would actually prevent them from fluctuating their fuel prices unpredictably. He warns that unless his measure is put into place, gas prices could fluctuate as much as 40 cents per gallon. Steinberg suggests that his plan to release fuel producers from AB 32, and raise fuel taxes on individuals instead is “transparent” and will prevent fuel producers from “gaming” the system.
State Senator Fran Pavley, the author of California’s cap-and-trade law, is firmly set against giving fuel producers any leeway on cap and trade. According to Pavley, letting oil and gas companies play by a different set of rules than other pollution producing industries would destabilize the progress made by AB 32 on global warming. Environmentalist groups, such as such as the Environmental Defense Fund are coming out against the tax as well not wanting to take a chance at weakening the climate change law already in place.
Politically, raising taxes, even in an ultra-liberal state is never popular with the masses. California Governor Brown is up for re-election and a gas tax hike, even though it comes with the lofty promise to save the planet and ease the plight of the poor might be a very hard sell.
By Alana Marie Burke
Follow me on Twitter