Peter Tateishi, CEO of the Associated General Contractors (AGC) of California, says the association is pleased Governor Gavin Newsom has decided not to suspend the state gas tax, as it had feared he might do so.
In June, Newsom and other U.S. state and local officials were asked by President Joe Biden to provide some relief at the pumps for drivers.
Biden said the governors of Connecticut and New York had temporarily suspended their gas taxes, and the governors of Illinois and Colorado had delayed tax and fee increases that had been planned.
The president said other states and local governments should follow their examples.
Two days after Biden’s request, Tateishi wrote Newsom and asked him not to suspend the state gas tax.
In his letter, Tateishi wrote suspending California’s gas tax “will further diminish our already under-maintained existing infrastructure and delay urgently needed, new transportation infrastructure improvements.
“We are already behind. In his 2022 State of the Union Address, President Biden acknowledged, ‘Now, our infrastructure is ranked 13th in the world. We won’t be able to compete for the jobs of the 21st century if we don’t fix that.’
“Suspension of California’s gas tax would have major economic consequences on hard-working, blue-collar Californians’ ability to work.”
Instead of suspending the gas tax, Newsom and state legislators agreed to a tax relief plan in which about 23 million eligible Californians could each receive payments of up to $1,050.
“California’s budget addresses the state’s most pressing needs and prioritizes getting dollars back into the pockets of millions of Californians who are grappling with global inflation and rising prices of everything from gas to groceries,” Newsom, Senate President pro tempore Toni Atkins, and Assembly Speaker Anthony Rendon said in a release.
According to the plan, the money will go to taxpayers instead of only to vehicle owners.
The size of the payments will likely vary inversely with income, with low- and middle-income Californians receiving the most assistance.
The agreement also includes a suspension of the state sales tax on diesel, which is as high as $7 in some parts of California, plus additional funds to help residents pay their rent and utility bills.
It is part of a $300 billion budget deal that was announced at the end of June.
The state is expected to begin sending out payments this fall.
Tateishi says suspension of the gas tax would have cost the state $4.7 to $5 billion per year in funding for road improvements.
“There’s a backlog in California of $150 billion in infrastructure work for roads, bridges and highways that needs to be undertaken,” said Tateishi.
AGC of California needs to be always vigilant in matters of state infrastructure funding, says the CEO.
In 2018, it was part of a coalition that helped defeat Proposition 6, an initiative to repeal the Road Repair and Accountability Act (RRAA).
Passed in 2017, RRAA raised taxes on gasoline by 12¢ per gallon, taxes on diesel by 20¢ per gallon and annual vehicle registration fees by $25 to $175.
The aim of the bill was to provide $5.4 billion annually for California’s transportation systems.
When he asked for state and local relief, Biden also called for a three-month federal gas tax holiday.
The president said that, although funds raised by an 18 cent tax per gallon on gasoline and a 24 cent tax per gallon on diesel helped pay for highways and public transportation, through the Highway Trust Fund, he was calling on Congress to suspend the gas tax for three months until the end of September this year.
With gas prices averaging almost $5 a gallon across the country, Biden said Americans deserve some breathing room as they deal with what he called “the effects of Putin’s war in Ukraine.”
Like AGC of California’s position on the state gas tax, the Associated General Contractors of America is against suspending the federal gas tax.
In response to Biden’s call to suspend the federal gas tax, AGC chief executive officer Stephen Sandherr said in a statement, “The president’s desperate proposal to suspend the federal gas tax won’t provide relief at the pump, but will add to the pain of using America’s roads and rails. That is because the irresponsible proposal, if enacted, would leave a massive hole in the federal Highway Trust Fund that pays for federal investments in road, bridge and transit improvement projects that would need to be filled with new taxes or additional deficit spending.”