Alaska governor: Time is now to triple the state's fuel tax rate

By Keith Goble, Land Line state legislative editor | Thursday, February 16, 2017

Gov. Bill Walker has proposed an effort at the Alaska statehouse to raise the state’s fuel tax for the first time in nearly a half-century.

The governor’s proposal would triple the 8-cent-per-gallon fuel tax rate over two years. The rate has remained unchanged since 1970, which is 17 years longer than the state with the second longest time between increases – Oklahoma.

Alaska’s tax rate was suspended from Sept. 1, 2008, to Aug. 31, 2009.

The Senate Transportation Committee recently held initial discussion on the bill to increase the tax on gas and diesel from 8 cents to 16 cents on July 1. Another 8-cent increase to 24 cents would take effect on July 1, 2018.

Marine fuel, jet fuel and aviation gasoline rates would be increased on the same dates. As of summer 2018 the tax rates would be tripled to 15 cents, 9.6 cents and 1.4 cents, respectively.

Gov. Bill Walker says the state’s existing tax rates are “outdated.”

The governor wrote in a letter to Senate President Pete Kelly, R-Fairbanks, that the two-part implementation approach in the bill would ease the transition to “a more practical tax base.”

“This bill would bring Alaska’s tax rate on highway fuel very close to the current national average of 25 cents a gallon.”

The legislation also creates a “Transportation Infrastructure and Maintenance Fund” as a new fund within the state’s general fund. Currently, all fuel tax revenues go into the unrestricted general fund.

HB60/SB25 would deposit the estimated $80 million annually into the fund. Motor fuel tax revenues would be used for highway maintenance.

Advocates say the change would create confidence that fuel revenues will be used to build and maintain transportation infrastructure.

A similar effort one year ago to double the state’s fuel tax was derailed because the revenue was not guaranteed to be applied for road purposes.

The trucking industry pays about 40 to 45 percent of the motor fuel taxes in the state.

During the recent hearing on the bill the Alaska Trucking Association voiced support for the tax increase. Executive Director Aves Thompson said the change is acceptable as part of a long-term fiscal plan.

“The Alaska Trucking Association has long supported a fuel tax increase if the funds could be dedicated to transportation needs,” Thompson testified. He added that the group would prefer to see phase two of the motor fuel tax increase delayed until 2019 to allow truck operations to incorporate the increases into their rate schedules.

Opponents say fuel taxes are increasingly ineffective at generating revenue for infrastructure work. They also blame poor spending practices for the lack of funds available for road work.

Instead, critics say the state would be better served to explore other options that include privatizing roads and looking into toll roads.

The funding measure is expected to receive additional consideration in future hearings.

To view other legislative activities of interest for Alaska, click here.

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