Motivations behind the California gas tax increase

This weekend, a 66% increase went into effect for the state gasoline (petrol) tax in California. The stated intention is to raise money for transportation projects:

Under Senate Bill No. 1, the gasoline tax will increase by 12 cents, from 18 cents to 30 cents per gallon, the Los Angeles Times reported after Gov. Jerry Brown signed the legislation in April.
As part of the legislation, motorists will also have to pay an annual vehicle fee, though that doesn't take effect until Jan. 1, 2018. The fees range from $25 for cars worth less than $5,000 to $175 for those valued at more than $60,000. Additionally, a $100 annual fee on electric vehicles will be imposed on owners in lieu of gas taxes beginning on July 1, 2020.
Most California drivers can expect the taxes and fees to cost them less than $10 each month, according to Brown.

The revenue increase

Well Jerry, let's look at the math. I'm ignoring the costs on diesel users here, just focusing on regular gasoline, so this will be an underestimate of revenue raised.

California population is approximately 39M. There are approximately as many registered vehicles as people. So the stated overall income delta to the state of California for the imminent change is $120/year x 39M vehicles, or $4.6 billion per year, based on Jerry's numbers.

How much gasoline did Californians buy in the past year? About 14.57 billion gallons. Add $0.12/gallon and that's $1.8 billion; the bulk of the increase will come from the per-vehicle fee. Looking at the scales, let's say $80 is average; that yields $3.12 billion.

Interestingly, electric vehicle users really get screwed by this. If I've read the spec correctly, they pay $100/year plus the value-of-the car tax. $100 looks to be at least 2x the average gas tax impact based on mileage.

So California shouldn't be exercised about the gas tax per se, they should be much more indignant about the per-vehicle charge. And electric vehicle owners should be marching on Sacramento to burn Jerry in effigy, if their vehicles can get them that far.

What gas costs, and why

The California tax situation is worse than it appears. In San Jose currently you'll expect to pay about $2.70/gallon; you'll pay $0.18/gallon federal gas tax, $0.12/gallon state gas tax, plus $0.06/gallon state sales tax. But there's also a secondary excise tax and an underground storage fee - yes, California taxes the right to store gasoline underground - which bumps the total California per-gallon tax to about $0.58; over 21% of your gas cost goes to the state of California.

Also note for completeness: in summer gas costs much more because California requires a special anti-pollution blend. This isn't crazy, especially if you live in a major conurbation like LA or the Bay, but you can easily find gas prices over $4/gallon. The extra $1/gallon or so yields another $0.02/gallon in sales tax for about half of the year.

Where it goes

Why is the California state government doing this? Well, because politicians will tax anything they can get away with. California already has more than enough money from gas taxes to address the issue of highway repair. Don't believe me? Check the math.

The stated need for highway repair in the California 2016-2017 budget was $3.6 billion annually, plus a $12 billion backlog:

Highway and Road Maintenance and Repair Needs. In order to assist the Legislature in its deliberations regarding increased funding for state highway and road repairs, we assess the costs to maintain and rehabilitate core aspects of the state highway system—pavement, bridges, and culverts—as well as local roads. We find that the state has ongoing highway repair needs of about $3.6 billion annually as well as an existing backlog of needed repairs totaling roughly $12 billion. This need is significantly higher than can be addressed through the existing funding of about $1.6 billion for these purposes.
Interesting. California is currently extracting $0.583 in tax per gallon of gasoline on 14.57 billion gallons of gas per year - $8.5 billion - and yet it's spending only 20% of that money on highway repair. What is it spending the rest on? You can bet that the excess is finding its way in disguise to be able to fund the usual payoffs: pensions and pet projects like the brain-meltingly dumb high speed SFO-LA rail.

We should ask: where does Governor Brown think this money will be spent?

“Safe and smooth roads make California a better place to live and strengthen our economy,” Brown said. “This legislation will put thousands of people to work.”
Oh, Jezza. Jobs are a cost, not a benefit. The minimum-wage Bay Area or LA commuter spending literally thousands of dollars per year on gas is not going to thank you for taxing him about $150/year extra to fund union workers doing fuck-all to fix potholes. (Believe me, I've had ample opportunity to watch them work while sitting in traffic jams. They could not move slower if they were quadriplegic.)

"But California is so big! It has the most roads!"
Nope. Texas has nearly 2x the road mileage of California. I've driven quite a lot in Texas, and their pothole situation feels better than California. Heck, you occasionally get actual freezes in Texas, which are practically unknown in California, and a classic source of potholes. The top 4 worst pothole cities are Californian. What the hell?

"California has other transport costs! Like congestion reduction!"
California does f-all congestion reduction, believe me. The only congestion reduction it likes which works is higher gas taxes. Building additional roads is waaaaayy down their priorities list, only just above "donate to Donald Trump's reelection campaign".
There are also additional separate revenue streams from vehicles in California. Existing annual vehicle registration is proportionate to the vehicle's current estimated value, and for a $30K car will set you back $100-$200/year. "Use tax" applies to all vehicle purchases - even second hand! - and the state gets 7.5% of the purchase. So for a $30K car you'd pay $2250; assuming you keep the car for 6 years, that's $375/year income for the state.

California doesn't have an income problem for its transport costs. It has a "not spending that money on transport costs" problem.

Measuring success

Where I work, if I were to propose recurrent spending of a significant chunk of my company's annual income on a project, I'd rightly be asked to define a measurement of its impact, and "success" criteria by which we could judge if the spending had an acceptably high impact, or if it should be stopped and I should be fired.

Jerry Brown: what will be your measure of success in spending the $5 billion+/year raised from the additional gas tax and vehicle fee? Is it just in "sustained union support of Edmund Gerald Brown, Jr"? You mendacious over-taxing git.



Binge watching the 2008 "classic" 'Lost in Austen', I find myself drawn to Mr. "Hugh Bonneville" Bennett's observation, addressing the linguistic and cultural shift between the early 1800's and early 2000's:

You do make the most refreshingly elliptic conversation, Miss Price.
Henceforth I resolve to use this idiom whenever I have no idea what my interlocutor is talking about. Unless they're addressing the topic of ECDH when the conversation would be elliptic, refreshing, yet still prone to make one's eyes cross.

I also appreciated the reference to the "otter-strewn thoroughfares of Hammersmith"; if ever I discovered an otter in Hammersmith, I'd expect it to be draped around the neck of a Russian lady resident of the area.


Hillary Clinton

Alleged comedian Jimmy Kimmel arranged for his staff writers to pen thank-you notes to Hillary Clinton, and - for a programme which people paid money to watch - had Miley Cyrus read them out live to Hillary.

At this stage you are down on your knees praying that this is a fake news post, but unfortunately I have to tell you that it is painfully real.

One note which particularly stuck with me - like a bad case of toenail fungus - was:

Thank you, Hillary, for always sticking to the issues even as people criticize you for superficial things like your hair, your wardrobe, and your appearance. You show girls everywhere that politics isn't a popularity contest — because if it were, you would have won by about 3 million votes.

Tell it sister! Politics is not a popularity contest.
Politics is a beauty contest[1]. Hair, height, clothes are all relentlessly honed for appeal.
And Hillary Clinton lost to Donald Trump.

[1] Not to mention that beauty contests are extremely political.


Called it: "Fearless Girl" was compensatory signalling

Back in April I expressed scepticism about the motivation behind the "Fearless Girl" statue placed in front of the Wall Street Bull by asset manager State Street:

I suspect that nothing other than their marketing department's desperate desire for publicity and their CEO's self-image were the main factors behind the project: since only 5 of their 28-strong leadership team are female, two of whom are in the traditional female bastions of HR and Compliance, one suspects that this is compensatory signalling.

Oh look:

State Street Corp., the $2.6 trillion asset manager that installed the Fearless Girl statue on Wall Street, agreed to settle U.S. allegations that it discriminated against hundreds of female executives by paying them less than male colleagues.
You'd have to have a heart of stone not to laugh. Heck, I have a heart of stone and nearly split my sides when I read about this.

This is interesting though:

State Street also recently launched its SPDR Gender Diversity exchange-traded fund, which focuses on firms that have greater gender diversity in senior leadership.
It will be fascinating to see how this does against comparable benchmarks over the next five years. It certainly doesn't seem to be the case that female leadership is necessarily a good thing for a company, and women in key board level positions have been associated with some fairly prominent failures.