A bill introduced Tuesday by California Assemblyman Kevin Kiley aims to challenge the state’s high gas taxes by potentially withholding federal highway funding. The legislation would target states with gasoline taxes exceeding 50 cents per gallon, a threshold California currently surpasses.
California drivers currently pay 70.9 cents per gallon in state gas taxes, the highest in the nation, according to the Tax Foundation. This figure is in addition to the 18.4 cents per gallon federal gas tax. The state’s layered fuel taxes include an excise tax, a 2.25% sales and use tax calculated on the retail price after excise taxes, local district taxes and an Underground Storage Tank Maintenance Fee of $0.020 per gallon, as detailed by the California Department of Tax and Fee Administration.
The excise tax itself is adjusted annually for inflation, with the current rate at 61.2 cents per gallon as of July 2025. The sales tax component fluctuates with gasoline prices. The Underground Storage Tank Maintenance Fee funds cleanup efforts for leaks from underground storage tanks.
Kiley’s proposal comes as California continues to grapple with some of the highest fuel prices in the country. The state justifies its high gas taxes as a means of funding road repairs, maintenance, and other infrastructure projects, as well as supporting climate goals. But, critics argue the taxes disproportionately burden consumers and contribute to the state’s high cost of living.
The proposed federal legislation would withhold a portion of highway funding from states exceeding the 50-cent threshold, potentially creating a financial incentive for states to lower their gas taxes. It remains to be seen how the bill will be received in Congress and whether it will gain enough support to become law.
The California Department of Tax and Fee Administration provides detailed breakdowns of fuel tax rates by period, including rates for motor vehicle fuel, aircraft jet fuel, and diesel fuel. These rates are subject to change and are updated periodically.
