There is no new gas tax in California. The higher number you’re seeing at the pump comes from an automatic inflation adjustment to a tax that has been on the books since 2017. On July 1, 2025, the state gasoline excise tax rose to 61.2 cents per gallon and the diesel excise tax rose to 46.6 cents per gallon.1California Department of Tax and Fee Administration. Tax Rates — Special Taxes and Fees — Fuel Taxes No new legislation was passed to make that happen. The mechanism was built into Senate Bill 1 eight years ago.
Why the Rate Goes Up Every July
Revenue and Taxation Code Section 7360 requires the California Department of Tax and Fee Administration to recalculate the excise tax every July 1, using the percentage change in the California Consumer Price Index as determined by the Department of Finance.2California Department of Tax and Fee Administration. Motor Vehicle Fuel Tax Law – Sec. 7360 If prices rose over the prior twelve months, the tax rises too. CDTFA has no discretion to skip or reduce the adjustment.
That formula came from SB 1, the Road Repair and Accountability Act of 2017.3California Transportation Commission. Senate Bill 1 The law imposed new per-gallon excise taxes and then layered the CPI adjustment on top starting in 2020. Every year since, the rate has climbed. Gasoline went from 57.9 cents to 59.6 cents on July 1, 2024, and then to 61.2 cents on July 1, 2025.1California Department of Tax and Fee Administration. Tax Rates — Special Taxes and Fees — Fuel Taxes Another adjustment is expected July 1, 2026, though the exact rate won’t be announced until closer to that date.
So the increases are automatic, not new law. No legislator votes on them. No hearing is held. CDTFA runs the math, publishes the new rate, and it takes effect statewide.
What You Actually Pay Per Gallon
The pump price includes several distinct charges. Some are fixed cents per gallon. Others float with the retail price. As of July 2025:
- State excise tax: 61.2 cents per gallon on gasoline, 46.6 cents on diesel. This is the piece that adjusts every July.1California Department of Tax and Fee Administration. Tax Rates — Special Taxes and Fees — Fuel Taxes
- Federal excise tax: 18.4 cents per gallon on gasoline, 24.4 cents on diesel, which includes a 0.1-cent Leaking Underground Storage Tank surcharge. The federal rate has not changed since 1993.1California Department of Tax and Fee Administration. Tax Rates — Special Taxes and Fees — Fuel Taxes
- State sales tax: 2.25 percent of the total transaction price for motor vehicle fuel, with local district taxes potentially added. Because the percentage applies after excise taxes are factored into the price, you pay tax on top of tax.4California Department of Tax and Fee Administration. Sales Tax Rates for Fuels
- Underground Storage Tank Maintenance Fee: 2 cents per gallon, funding cleanup of leaking petroleum tanks.5California Department of Tax and Fee Administration. Tax Rates — Special Taxes and Fees
Add these together and California drivers face some of the highest combined fuel taxes in the country.
Costs at the Pump That Aren’t Taxes
Two California environmental programs add real money to every gallon, even though they are not classified as taxes. They often get lumped in with “the gas tax” in casual conversation, which is part of why people assume something new must have passed.
The first is the state’s greenhouse gas cap-and-trade program, which requires fuel distributors to buy carbon allowances. Those costs pass through to drivers. At carbon prices around $30 per ton, the pass-through works out to roughly 24 cents per gallon. The amount shifts with the price of allowances at quarterly auctions.
The second is the Low Carbon Fuel Standard. This regulation requires fuel producers and importers to reduce the carbon intensity of their products over time, largely by blending in cleaner alternatives. The California Air Resources Board estimates the pass-through cost to consumers at about 8 to 10 cents per gallon.6California Air Resources Board. Myth vs. Fact – Low Carbon Fuel Standard (LCFS)
Neither program appears as a line item on your receipt. Together they can add roughly 30 cents or more per gallon on top of the taxes above.
Where the Money Legally Has to Go
California’s constitution restricts how gas tax revenue can be spent. Article XIX treats motor vehicle fuel tax revenue as a trust fund limited to public streets, highways, and related transportation infrastructure.7California Legislative Information. California Constitution – Article XIX Motor Vehicle Revenues Article XIX A bars the legislature from borrowing or transferring public transit funds into the general fund.8Justia Law. California Constitution Article XIX A Section 1 The money cannot legally be diverted to plug unrelated budget holes.
SB 1 further divides its revenue into specific categories over a ten-year horizon. The largest allocations are $15 billion for local street and road maintenance and $15 billion for state highway maintenance and rehabilitation, with additional amounts directed to transit, bridge and culvert repairs, freight corridors, active transportation, and transportation research.9LegiScan. California Code – Senate Bill 1
Can the Annual Increase Be Stopped
Voters have already had one direct chance to end SB 1. In November 2018, Proposition 6 would have repealed the Road Repair and Accountability Act and required voter approval for any future fuel tax increases. It failed, with roughly 57 percent of voters keeping SB 1 in place. That result locked in the annual CPI mechanism.
Legislators have since floated bills to give the governor authority to suspend a scheduled increase when gas prices are already squeezing households. AB 3005 would have permitted the governor to skip a July adjustment upon finding that it would impose an undue burden on low- and middle-income families, provided the administration identified an alternative funding source. No such suspension authority has been enacted. The July 1 adjustments continue automatically until the law changes or the CPI stops rising.