The California State Board of Equalization passed a new gas tax with a 3-2 vote Thursday that raises the excise tax on gasoline another 3.5 cents effective Jul. 1.

In March 2010, Gov. Arnold Schwarzenegger signed two fuel tax measures (ABX8 6 and SB 70) which adjusted the rates of the sales and excise tax on gasoline that would help close a gap and balance the budget in 2010.

“This tax swap was the only way that they could take the money from the road fund to try and balance the budget in 2010,” said George Runner, Member of the State Board of Equalization.

These two laws created a new tax structure for gasoline and mandated the BOE to adjust the state gasoline excise tax rate by Mar. 1 of each year. This rate adjustment ensures the overall state taxes consumers pay at the pump remain the same as they would have been under the prior tax structure.

George Runner

The “complicated” fuel tax swap legislation was designed to be revenue neutral, ensuring overall state taxes consumers pay at the pump would remain the same as they would have been under the prior tax structure. During times of rising gasoline prices a sales tax revenue loss also rises because of the “tax swap” requiring the BOE to adjust the excise tax rate to make up for the loss and maintain the revenue neutrality as required by law.

George Runner (District 2) and Michelle Steel, (District 3) were the two BOE members who voted no.

“I cannot support a more than half a billion dollar tax increase on struggling Californians who are already experiencing significant pain at the pump,” said Runner.

The excise tax has been estimated to bring in 500 million dollars in revenue and would be used primarily to fund transportation, ie. public roads and mass transit, said Runner.