California Board of Equalization votes to increase gas tax

[Lloyd]

Washington state's taxing EVs separately already:

EV owners in WA to pay extra $100 annual fee - Autoblog

CA may not be far behind.

They may not be far behind, but keep in mind that California is trying to lead the way towards promoting EV's, and adding a tax to ownership does the opposite of thier goal. We should make ourselves heard that EV's should stay free! At least until the numbers are there to get us off our dependency on foreign oil. Money collected for Gas taxes in California does not all go to repair the roads as it was designed to do. An increasingly larger percentage goes to the general fund for the state to make up other shortfalls. Taxes collected to repair the roads should be spent on the roads. If there is a surplus, lower the tax rate.

 

[Al Sherman]

Taxes collected to repair the roads should be spent on the roads. If there is a surplus, lower the tax rate.

What a lovely dream.

 

[SByer]

They do need to find some way to tax EVs. Gas taxes pay for the roads and EVs use the roads.

Gas taxes are extremely low historically and don't even make up for the upstream subsidies given to the oil industry. In California, gas taxes cover less than 1/3 of needed ongoing road maintenance, and none of needed new construction. The rest comes from the general fund.

And, as for use the road, road wear goes up as the cube of axle weight. That means that the lightest road users are subsidizing the heaviest.

Let's get rid of those oil subsidies first, even out the playing field in terms of road use, and then we can figure out an equitable way of charging EVs.

 

[brianman]

They may not be far behind, but keep in mind that California is trying to lead the way towards promoting EV's, and adding a tax to ownership does the opposite of thier goal

Washington state is also trying to promote EV ownership (no sales tax on the vehicle). Government is often non self-consistent in direction -- except usually consistent in raising taxes across the board.

 

[AMPd]

Oregon proposes a mileage tax on EVs

Oregon proposes 1.5-cent-per-mile mileage tax for EVs, would also target 55+ mpg cars - AutoblogGreen

 

[Lloyd]

Gas taxes are extremely low historically and don't even make up for the upstream subsidies given to the oil industry. In California, gas taxes cover less than 1/3 of needed ongoing road maintenance, and none of needed new construction. The rest comes from the general fund.

And, as for use the road, road wear goes up as the cube of axle weight. That means that the lightest road users are subsidizing the heaviest.

Let's get rid of those oil subsidies first, even out the playing field in terms of road use, and then we can figure out an equitable way of charging EVs.

I believe you are mistaken. In 2010 California voted to allow additional appropriation of tax monies collected as fuel taxes away form expendatures for the roads. See the following references:

http://www.fuelingcalifornia.org/wpcms/wp-content/uploads/fueling-ca-hpq-3-0.pdf

http://www.utsandiego.com/news/2013/feb/23/gas-taxes-california-fuel-cars-driving-mpg/

 

[SByer]

Lloyd, I'm afraid I need you to qualify that more. The first PDF doesn't specify anything about the percentage of road work that is funded by gas taxes, and the second implies that the recent changes are quite insignificant. The recent changes by the board of equalization might boost the percentage of road maintenance from gas taxes to maybe 40%, being generous. But then, the 1/3 was already being generous.

And neither count upstream subsidies.

Sent from my Nexus 7 using Tapatalk 2

 

[Kaivball]

Gas taxes are extremely low historically and don't even make up for the upstream subsidies given to the oil industry. In California, gas taxes cover less than 1/3 of needed ongoing road maintenance, and none of needed new construction. The rest comes from the general fund.

And, as for use the road, road wear goes up as the cube of axle weight. That means that the lightest road users are subsidizing the heaviest.

Let's get rid of those oil subsidies first, even out the playing field in terms of road use, and then we can figure out an equitable way of charging EVs.

Source, please.

Federal gas tax alone raised $25 billion in 2006.

Fuel taxes in the United States - Wikipedia, the free encyclopedia

Exxon makes about $0.02 per gallon in profit and the government collects almost $0.50.


Gasoline Taxes Vs. Exxon Profit, Per Gallon

And when you say "subsidies" I assume you are talking about the business write offs these businesses like thousands of others take, right?

Technically, that's not a subsidy. Tax money not collected is not a "subsidy", unless you call the mortgage interest deduction a subsidy as well. A tax deduction and a subsidy are not synonymous.

Oil, gas companies arent subsidized - NYPOST.com

 

[Kaivball]

Lloyd, I'm afraid I need you to qualify that more. The first PDF doesn't specify anything about the percentage of road work that is funded by gas taxes, and the second implies that the recent changes are quite insignificant. The recent changes by the board of equalization might boost the percentage of road maintenance from gas taxes to maybe 40%, being generous. But then, the 1/3 was already being generous.

And neither count upstream subsidies.

Sent from my Nexus 7 using Tapatalk 2

What "subsidies" are you talking of? You mean business tax deductions?

The federal government collects >$25 billion in annual fuel taxes.

Are you contending that the government writes checks exceeding $25 billion to oil companies?

Surely not.


Here is some good reading on the subject:

http://www.heritage.org/research/reports/2011/05/whats-an-oil-subsidy


The salient points:

Broadly Available Tax Provisions Are Not Oil Subsidies

In many cases, what the President and anti-oil crusaders label an oil subsidy is neither a subsidy nor a tax treatment specific to the oil and gas industry. These are broad tax policies that apply to many industries. When the Administration takes aim at these provisions specifically in the oil and gas industry, it is essentially a targeted tax hike. These provisions include:

Section 199 Deduction.
This tax deduction, under Internal Revenue Code Section 199, goes to all domestic manufacturing. Producers of clothing, roads, electricity, water, and many other goods produced in the United States are all eligible for the manufacturer’s tax deduction. The Section 199 deduction is unavailable to the service sector, and even that is a stretch, as the tax deduction includes music and movie production. Removing oil and gas production eligibility for this tax break is not removing a subsidy or closing a tax loophole but imposing a targeted tax hike. In fact, Congress already imposed a tax hike on oil and natural gas companies by freezing the deduction at 6 percent when other manufacturers receive a 9 percent deduction.


Foreign Tax Credits and Deferral of Foreign Income.

The foreign tax credit and deferral are two critical features of a worldwide tax system that prevent the U.S. corporate income tax from double taxing—and further crippling—the international competitiveness of U.S. companies. The President has proposed cutting deferral and limiting the applicability of the foreign tax credit. This would significantly increase taxes paid by U.S. businesses, subjecting more U.S. foreign income to double taxation and severely undermining the ability to compete abroad and grow at home. The President is charging in exactly the wrong direction. He should instead advance the competitiveness of American companies and workers by proposing to eliminate the U.S. tax on foreign source income. Foreign tax credits and deferral of foreign income are not unique to the oil industry, so the President’s proposal is just another punitive, targeted tax hike.


Immediate Expensing Should Be Complete and Permanent

Another non-subsidy target of the Administration is oil companies’ ability to expense capital costs in the year of the purchases.
Immediate expensing allows companies to deduct the cost of capital purchases at the time they occur rather than deducting that cost over many years based on cumbersome depreciation schedules. Expensing is the proper treatment of capital expenditures. Depreciation raises the cost of capital and discourages companies from hiring new workers and increasing wages for existing employees. Immediate expensing for all new plant and equipment costs—for any industry or type of equipment—would allow newer equipment to come online faster, which would improve energy efficiency and overall economic efficiency.
Even President Obama has championed temporary 100 percent expensing for qualified capital because it lowers the cost of investment.[2] Congress should make immediate expensing permanently available for all business investments.

All companies, including oil and gas companies, should be able to expense their full capital costs immediately. Until that critical change in the tax code is made for all businesses, Congress should retain all provisions that move the tax code in the direction of expensing.

 

[wycolo]

> Washington state is also trying to promote EV ownership (no sales tax on the vehicle). [brianman]

Nice! Just forked $4884-US for $ales Tax and today will cough up ~$1500- more for the reg. Based on $81,400- price of Model_S.
Warm fuzzy feeling that only money can buy. :tongue:
--

 

[AMPd]

How Big Oil gets bigger: over $620 Billion spent on subsidies for fossil fuel in 2011 - AutoblogGreen

 

[ChadS]

And when you say "subsidies" I assume you are talking about the business write offs these businesses like thousands of others take, right?

I can't speak for SByer; and in fact I don't agree with him that that direct oil subsidies are larger than tax income on petroleum. (Although the indirect subsidies are far larger. The GAO estimates $2/gallon of gas, or an average $12k subsidy per gas car, and they are explicitly not counting external costs like wars, health effects, carbon mitigation, or military patrols in Hormuz - figures that dwarf all the ones we are discussing here).

However, SByer is correct that there are many oil-specific subsidies, not just the standard deductions that any business can take. VFX posted a long list in these forums (though that was quite a while back). HERE is a NYT article that discusses some of them. HERE is an EIA analysis (the EIA was established specifically for protecting Western oil interests, and their last major report argues extremely strongly for ending oil subsidies). And HERE is even the Heritage Foundation admitting there are oil subsides that should go away - even while they argue that tax treatments aren't subsidies, and for continuing special oil tax treatments.

Part of the confusion is that you and the Heritage Institute are (correctly) noting the technical distinction between things like tax deductions and credits, and a subsidy. However, people that aren't economists (which include most of the people here) regularly use the word "subsidy" to cover all of them - the reason being that the end result is exactly the same. So the common use of the term "subsidy", even though not technically correct, does include the mortgage interest deduction, and the federal tax credit for electric car.

So what many here are trying to say is, oil companies get a lot of special tax treatments and subsidies (in addition to the normal tax treatments), and most people would like to see the special financial incentives go away. Agreed?

 

[Kaivball]

I can't speak for SByer; and in fact I don't agree with him that that direct oil subsidies are larger than tax income on petroleum. (Although the indirect subsidies are far larger. The GAO estimates $2/gallon of gas, or an average $12k subsidy per gas car, and they are explicitly not counting external costs like wars, health effects, carbon mitigation, or military patrols in Hormuz - figures that dwarf all the ones we are discussing here).

However, SByer is correct that there are many oil-specific subsidies, not just the standard deductions that any business can take. VFX posted a long list in these forums (though that was quite a while back). HERE is a NYT article that discusses some of them. HERE is an EIA analysis (the EIA was established specifically for protecting Western oil interests, and their last major report argues extremely strongly for ending oil subsidies). And HERE is even the Heritage Foundation admitting there are oil subsides that should go away - even while they argue that tax treatments aren't subsidies, and for continuing special oil tax treatments.

Part of the confusion is that you and the Heritage Institute are (correctly) noting the technical distinction between things like tax deductions and credits, and a subsidy. However, people that aren't economists (which include most of the people here) regularly use the word "subsidy" to cover all of them - the reason being that the end result is exactly the same. So the common use of the term "subsidy", even though not technically correct, does include the mortgage interest deduction, and the federal tax credit for electric car.

So what many here are trying to say is, oil companies get a lot of special tax treatments and subsidies (in addition to the normal tax treatments), and most people would like to see the special financial incentives go away. Agreed?

I think the Heritage article addresses the "direct" subsidies very well.

They are very minor.

 

[neroden]

I've actually benefited from some of the oil-specific subsidies and I know details of several of the others:
- percentage depletion after basis is driven to 0 -- this is actually a very large subsidy for those who get it, though since the late 1980s it only applies to small oil companies, not to big ones.
- domestic production activities deduction -- smaller, but big oil companies get it
- other depreciation breaks (such as documented in the NYT article) -- these are big.
- and sub-market royalty rates to the US government for extracting oil from land where the US owns the mineral rights -- this is the biggest one.

Most of the oil produced by most oil companies in the US is on land or in water where the federal government owns the mineral rights; basically everything west of the Appalachians and everything offshore.

The leases are *temporary*. The US government has the right to re-bid them on a regular basis.

Instead, the royalty rates which the US is collecting were fixed in the *1920s* and the leases are treated as if they are ownership rights, extended over and over again at the same rates by a compliant, oil-company-controlled Congress. Those rates are *far* below what the market would offer if the leases were allowed to expire and the rights rebid.

The federal subsidies for oil companies are ;large, and like most such things, very complicated. The more confusing they can make them the less likely people are to repeal them. Most people have never actually looked into the details of the accounting. Now, most states extract sizeable severance taxes, which cancel out some of this and effectively create a wealth transfer from the federal government to those states. Some states don't, and there the oil companies really are making out like bandits.

 

[ChadS]

HERE is a Bloomberg article about the IMF calling for energy subsidies (Bloomberg in this article and IMF in their report both use "subsidies" in the loose sense; including any mechanism that transfers money to the producers) to go away. They say the US is the largest offender ($502 billion in 2011; more than 1/4 of the world's subsidies), followed by China and Russia.

The IMF paper is HERE.

 

[FlasherZ]

HERE is a Bloomberg article about the IMF calling for energy subsidies (Bloomberg in this article and IMF in their report both use "subsidies" in the loose sense; including any mechanism that transfers money to the producers) to go away. They say the US is the largest offender ($502 billion in 2011; more than 1/4 of the world's subsidies), followed by China and Russia.

The IMF paper is HERE.

Won't happen, it's political suicide and no elected politician will go there unless the US reaches the level of danger now being felt in the EU.

 

[ChadS]

Yeah, to my mind the difference between a leader and a politician is that a leader will convince you of what needs to happen to support the interests of the country and its citizenry; whereas a politician will tell you what you want to hear. I agree that these "subsidies" are unlikely to go away in the US until there is a real crisis and the voters demand it.

But it is clear that the subsidies are very large, damaging our economy, and distorting the free market. There is no level playing field.

 

[EVNow]

Exxon makes about $0.02 per gallon in profit and the government collects almost $0.50.

I'm all for stopping taxing gas and let the big oil fend for themselves in the middle east. Oh, pls pay for the damage their products are causing in terms of air pollution.

 

[stopcrazypp]

I'm all for stopping taxing gas and let the big oil fend for themselves in the middle east. Oh, pls pay for the damage their products are causing in terms of air pollution.

It's a false equivalence in the first place.

On the federal level, a vast majority of gas tax revenue goes to roads and bridges (and although some goes to "earmarks," they go to related construction projects that still benefit the public). In California, about 90% goes to infrastructure and the rest to public transit.

On the other hand, the oil companies are pocketing that $0.02/gal (or whatever I take it this varies with the oil price) as direct profit.