San Joaquin Farm Bureau Federation

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By Vicky Boyd

With the Nov. 1 increase in fuel excise taxes, diesel sales tax and ensuing vehicle registration fees, San Joaquin County producers' pocket books just took another hit. As with other rising expenses, such as escalating minimum wages, growers say they will have a tough time passing increased fuel costs on to their buyers and customers.

"Each hit is one we don't need," said Dave Phippen, an almond grower and partner in Travaille & Phippen in Manteca. "The price of just about everything is going up, but the price of almonds haven't."

Joe Valente, a farm and vineyard manager in Lodi who typically has four semi-trucks on the road most days, agreed.

"It's going to make everything more expensive," he said. "It's going to be another tax, another added cost."

Citing a 1960 quote from then-presidential candidate John F. Kennedy, Valente said the farming industry is in a unique position compared to other industries that can charge for shipping.

"For the farmer is the only man in our economy who has to buy everything he purchases at retail – sell everything he sells at wholesale – and pay the freight both ways," Kennedy said in his South Dakota speech.

San Joaquin County growers are not alone in their disdain for the new fuel taxes. Reform California, a group led by former San Diego City Councilman Carl DeMaio, has filed paperwork with the state attorney's office to start signature gathering to qualify a measure for the November 2018 ballot.

If passed, he said the measure would repeal the tax legislation and require future fuel tax increases be put before voters for approval. The group needs 587,407 signatures to qualify the initiative.

The California Farm Bureau, which was among about two dozen agricultural groups that opposed the original fuel tax bill, has yet to take a position on any possible repeal, said Cynthia Cory, CFBF director of environmental affairs in Sacramento.

"We'll have to wait until it becomes a real initiative before deciding," she said.

SJFB, which was among those opposing the fuel tax increases, also has not taken an official position on repealing them, said David Strecker, first vice president. But, he said the issue is being watched closely.

The increases in fuel taxes and vehicle fees are the result of Senate Bill 1, also known as the Road Repair and Accountability Act. The Legislature passed it in April, and Gov. Jerry Brown subsequently signed it into law. 

During the next decade, it is expected to raise $52 billion, of which the bulk will go toward building and repairing state roadways. The bill also earmarked smaller amounts for parks, transit and intercity rail, bicycle and pedestrian improvement projects, and freeway patrols for disabled vehicles, among other projects.

Effective Nov. 1, SB 1:

  • Raised the gasoline excise tax by 12 cents per gallon to 41.7 cents per gallon from 29.7 cents per gallon.
  • Increased the diesel excise tax by 20 cents to 36 cents per gallon from 16 cents per gallon.
  • Increased the diesel sales and use tax by 4 percent to 13 percent from 9 percent.
  • Indexed diesel and gas taxes to inflation beginning July 1, 2020.

Excise taxes differ from sales taxes in two ways: They are applied to specific goods, such as fuel, and are not applied across the board. They also are a flat rate and not a percentage of the purchase price, like sales taxes are.

  • Beginning Jan. 1, 2018, SB 1 will impose an annual Transportation Improvement Fee, ranging from $25 to $175, on vehicles based on their value. This, too, will indexed to inflation. Owners of cars worth less than $5,000, for example, will pay $25 annually. Those with vehicles valued at more than $60,000 will pay $175.
  • Beginning July 1, 2020, SB 1 will charge zero-emission vehicles, such as the Tesla and Nissan Leaf, a $100 annual fee 
  • The partial exemption from sales and use taxes on diesel sales remains the same at 2.25 percent. This is for the dyed, or red, diesel for equipment devoted to farming or food processing at least 50 percent of the time.

Feeling the impact Because the tax increase began at the tail end of harvest – Phippen's highest taxable diesel use period – he said he hadn't yet figured out how much impact it will have.

"I haven't seen any bills yet, so I haven't been shocked," he said. "It's just going to be another increase to the costs of our operation, and it's going to increase the part of our operation that puts vehicles on the road."

The bulk of diesel Phippen uses is for off-road farm equipment, such as tractors. As such, he purchases what he called "red" or dyed diesel that carries the partial tax exemption.

For his semi-trucks that haul empty sets of double trailers to almond grower's orchards and then pick up sets of full doubles, he uses "clear" diesel subject to the new excise and sales taxes. Phippen's largest exposure to the higher diesel taxes is a two and one-half month window from mid-August through late October that coincides with harvest.

But, he said the impact of the tax increases for gas used in their pick-up trucks will be nearly immediate. "We'll be feeling it as soon as we fill up," he said.

Valente, who buys clear diesel by the truckload about every two weeks, said he hadn't seen the first bill since the tax and fee hike took effect. Between operations in southern Sacramento County, San Joaquin County and the foothills, he said he typically has four semi-trucks on the road. During harvest, they haul grapes. Other times of the year, the trucks are moving dirt, equipment or other supplies among the various operations. Each truck gets about 4 to 5 miles per gallon. Although a 5-cent-per-mile increase may not sound like much, Valente said it can quickly add up. Strecker, who farms forage and row crops in the Delta, doesn't own any transport trucks, but everything he grows has to be shipped. Although he won't be paying the higher fuel taxes directly, Strecker said he expects price increases from the haulers he uses. 

The measure took effect at the end of his harvest, so Strecker said he doesn't know yet how those hauling fees will change for the 2018 season. "It also depends on the commodity," he said. "People like dairy obviously will see everything a lot sooner because they are basically harvesting every day."

Even some tree, vine and row-crop growers may see higher costs for delivery of fertilizer or pest control materials they're applying this fall, Strecker said.