After threatening a veto, Gov. Arnold Schwarzenegger Monday signed bills to implement a fuel tax swap — repealing California’s sales tax on gasoline, but replacing it with an excise tax designed to generate the same amount of revenue.
While the end result is designed to be revenue neutral to motorists who buy fuel, and to the California state government as a whole, the bill is expected to provide $1.1 billion toward closing the state’s $19 billion budget gap, because excise tax revenue will be used to pay for debt service on outstanding general obligation bonds issued for transportation projects.
Constitutional prohibitions had prevented the state from using the sales tax on gasoline for that purpose.
The Republican governor had threatened a veto after the Legislature’s majority Democrats revised his original proposal by retaining the sales tax on gasoline and using it to fund public transit systems.
But the Schwarzenegger relented after lawmakers passed two other “jobs” bills he wanted: a tax credit for buying newly built homes, and a sales tax exemption for “green” technology.
“The package of bills as written will provide significant benefit to the state’s general fund and will help put Californians back to work,” Schwarzenegger wrote in his signing statement. “For these reasons, I am signing these bills.”