Gov. Arnold Schwarzenegger last week ordered an investigation into gouging at the gasoline pumps. I looked around a little while and I believe I found some.

But it’s by the state. The state is getting windfall profits from the rise in gasoline prices.

You see, California is among the highest-taxers at the gas pump, which is why this state’s gasoline costs more than many places. But most states stop at a per-gallon tax. California goes beyond that and charges a sales tax of 6 percent on gasoline sales. Counties ding us for another 1.25 percent on the sales tax and cities often tack on more. In Los Angeles, sales taxes on gasoline total 8.25 percent.

And all of this is included in the bottom line price you pay for gas, so you don’t even notice it. But remember, this is a sales tax. It is a percentage added to your purchase of gasoline. The more gasoline rises in price, the more you pay in tax. Even if you buy no more gasoline than usual, even if you buy a little less, you’ll still pay more tax.

Do the math. Say you’re spending a buck per gallon more now than at the end of the year, which is close to right, and say you buy 100 gallons a month, which is close to the California average.

That means that in addition to the higher price you’re paying for the gasoline, you’re also paying more in tax to the state and local governments about $8 a month more.

If gasoline stays $1 a gallon higher in price this year, and if Californians buy about 16 billion gallons this year, that would mean the state will get about $1 billion extra a year that’s extra in gasoline sales tax revenue. That assumes we buy not one gallon more than the year before.

What justifies the state getting this extra revenue? Absolutely nothing. Unlike oil companies, it does not have the excuse that it must pay more for the rising price of crude oil. Unlike oil companies, it does not have the obligation of plowing its profits back into extracting ever-harder-to-get oil for the future. Instead, the state is enjoying a true windfall. Additional income for no additional cost or obligations.

But it gets worse. Remember the per-gallon taxes? The federal government dings us for 18.4 cents and the state for 19.4 cents. That’s 37.8 cents a gallon in taxes, plus there often are additional per-gallon taxes. Here’s a ruthless twist: The California gasoline sales tax is applied to those taxes as well. In other words, we’re paying taxes on taxes.

Yes, we’re being gouged at the pump, all right.

So what’s the state doing to relieve our burden? Is it thinking of rolling back taxes? Nope. That’s not the way the greedy think. They’re thinking of increasing gasoline taxes.

One proposal would increase gas taxes in the state by 25 cents a gallon over five years.

The insidious feature of gasoline taxes, of course, is that they fall hardest on the working poor and middle classes, the ones who have to drive two hours each way to work from the inland, or the woman who can’t afford a new Prius but can buy a used Buick.

So if the governor really wants to find the gougers, maybe he should set up a big mirror in Sacramento, gather the legislators in front of it and take a look.

Charles Crumpley is editor of the Business Journal. He can be reached at

[email protected]

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