California has become one of the most expensive places to live in the United States. Whether it be the cost of housing, exorbitantly high income taxes, or especially the cost of energy, high costs have pushed many people and businesses to leave for more affordable states such as Nevada, Texas, or Florida.
Of the many famously high and onerous taxes that plague California, few come close to the celebrity of California’s fuel taxes, which are set to increase on Wednesday by an additional 2.2 cents to 63.4 cents per gallon of gasoline, and by 1.6 cents to 48.2 cents per gallon of diesel — just in time to celebrate Independence Day.
Terrible roads in exchange for the country’s fuel taxes
The cost of fuel in California has been high for many years due to a combination of environmental fees, totaling around 54 cents per gallon, self-imposed supply chain limitations that have led to refinery closures, and a progressively increasing state excise tax.
CALIFORNIA’S BILLIONAIRE TAX PROPOSAL HEADS TO VOTERS AS NEWSOM PUSHES NATIONAL WEALTH TAX
However, the abnormally high fuel cost has come under extra scrutiny recently due to price fluctuations of gas and diesel as a result of the Iran war and the chaotic closing and reopening, and then closing and reopening again, of the Strait of Hormuz. The strait serves as a transit corridor for upwards of 20% of the world’s global flow of energy, such as oil and natural gas, and California imports approximately 30% of its oil from the region.
Beyond the unnecessarily overextended fuel supply chain, much of which would be uncomplicated if in-state production were prioritized, let alone encouraged, lies the challenge of identifying how these high taxes and fees, upwards of $14.4 billion in 2025, are improving the transportation infrastructure of the state, given that it arguably has some of the worst roads in the nation.
Every state and the District of Columbia levies a fuel tax, in addition to the federal gas tax of 18.4 cents per gallon and the diesel tax of 24.4 cents per gallon, to fund transportation infrastructure, which is supposed to prioritize road maintenance. In California, even after collecting the highest fuel-related taxes and fees in the country, the transportation infrastructure remains abysmal.
The primary reasons are unsurprising given the notoriously poor management of the state’s political leadership. Bloated bureaucracy, high administrative costs, and excessive red tape have led to multiple years of backlogs and maintenance deferrals, increasing the cost of repairing and expanding California’s roads by billions of dollars.
Compounding the problem of inconsistent maintenance is California’s umbrella-like disbursement of funds without clear intent and a lack of genuine transparency or accountability. Even with the promise of increased transparency and a better allocation of funds from the Road Repair and Accountability Act of 2017, the spending discretion of funds by local and state bureaucracy has led to further distrust in public leadership and a tangibly low return on public investment for better roads.
Another key factor behind rising fuel taxes and poor-quality roads is the present and projected future loss of revenue, upwards of $1 billion by 2027, due to the forced adoption of electric vehicles and the general adoption of more fuel-efficient vehicles, including hybrids, by Californians.
Those who have been able to afford EVs, which have historically come with economically unfair tax subsidies, haven’t had to pay the gas tax, and those who have opted for more fuel-efficient vehicles simply don’t have to fill up as often. For this reason, Sacramento has been experimenting with a road usage tax calculated per mile driven, but it is unlikely that fuel taxes would go away if, and when, this were to be passed, given the tax-glutinous nature of California’s leadership and the improbability that millions of residents would trade in older, likely paid off, vehicles, in exchange for an EV they might not want.
Two hundred fifty years of independence just to pay high taxes again
WHO REALLY PAYS FOR CALIFORNIA’S MEDICAID FRAUD SHELL GAME?
Saturday marks the 250th anniversary of the United States, a nation founded on the principles of individual liberty, freedom, and the pursuit of happiness. Contrary to these important concepts, Sacramento continues to demonstrate a lack of understanding of America’s founding principles by once again raising a burdensome tax that has historically yielded a poor return on investment for Californians and imposing limitations on many seeking to travel, let alone drive to work or visit loved ones.
The indifference, arrogance, and contempt that California’s political leadership holds for its residents are precisely the qualities that Americans fought against in the nation’s war for independence as they sought freedom from taxation without representation. As Californians prepare to pay higher taxes on gas and diesel yet again, and just three days before Independence Day, they should really start to question whether America’s founders would have wanted people to be seen by their representatives as nothing more than a source of tax revenue.
Caleb Jasso is a senior policy adviser at the Institute for Energy Research and a native of California.