How did California get to the winner’s circle for the highest gasoline prices in the United States?
That may seem like an easy question but when you look at the tax structure, the U.S. and California energy policies, and most importantly look behind the curtain for the real motivation the story gets complicated quickly. Tax and energy policies vary by state and are implemented by politicians that you vote into office.
I have written several articles this year on the energy policies in California and how they negatively impact the environment and have higher prices for consumers. The hypocrisy is unbelievable that California would import over 22% of its oil from Iran even though United States sanctions were in place and is the world’s largest importer of the oil produced in the rainforest. All while effectively shutting down the U.S. oil producers that can provide oil at a fraction of the cost, and with less impact on the environment.
The graphic below gives us an idea of the tax revenue volume for the top 10 states. California, New York, and Texas are the top three states in tax revenue.
So, let’s look at a cultural mindset and top categories from where the revenue is generated. My family has been in the oil business for over 100 years, and I am 100% Texan. In Texas, we do not pay personal income taxes and the state makes 63% of its income from general sales tax; 24% from selective sales items and property taxes, and the remainder from licenses.
Texas does not tax personal income and strives to encourage business, growth, and prosperity.
So let us compare it with California’s cultural mindset. When looking at where people place their importance, just look at where they get or spend their money. California gets its revenue from 36% in general sales, 7% from licenses, 8% from other sources, and 49% from personal income.
Does it hit home now? 49% of the state’s revenue is from California’s citizen’s personal income.
Why is there a mass exodus from the state?
And why is Texas growing with companies and people moving into the state at record rates?
Now that the mindset difference is established between Texas and California let’s do a little bit deeper dive into the gas rates compared to the rest of the states.
Gas and Diesel Tax by State
The chart below shows the current tax for gas and diesel by the state for this year. Pennsylvania and California are ranked number one and two with $1.33 and $1.21 respectively. Both are on the far left of the chart.
On the far right of the chart, Texas is ranked number 44 at $.40 cents.
The Bottom Line
Both Pennsylvania and California have several key factors in common when looking at the high price of gasoline, diesel, and energy. Both have limited any growth in energy infrastructure over the last 30 years in pipelines, and refineries, and both have incredible natural resources within their states. They also have a history of voting for elected officials to shut down low-cost energy.
Texas has a wide range of energy production including renewable and fossil fuels. All forms of energy are encouraged, and taxes are primarily based upon sales tax. Let’s also remind ourselves that we cannot forget the environment and the impact of energy policies.
Your financial path should be within your control. In Texas, you can pay taxes based on what you buy, and in California, you are taxed for being a citizen with no choice. In both states, you need to look at your portfolio and pick the best tax solutions. Being an American is all about freedom and what items you pay taxes.
The cultural mindset is the determining factor for the politician’s path on energy, fuel taxes, and personal wealth. So, if you voted them into office you are part of the problem. How you fix it is to you.
As always check with your CPA if alternative investments are good for your portfolio
Please reach out to our team at any time for answers to your questions.
Jay R. Young, CEO, King Operating
ForbesBooks Author of “The Upside of Investing in Oil and Gas"