Alaska one step closer to doubling fuel tax

A bill halfway through the Alaska Legislature would increase the state’s lowest-in-the-nation fuel tax rate for the first time in half-a-century.

The state charges an excise tax of 8 cents per gallon on gas and diesel purchases. The rate is unchanged since 1970.

The Senate voted 12-5 to advance the bill to raise money for transportation purposes. Specifically, SB115 would double the current 8-cent tax rate for gas and diesel to 16 cents per gallon.

The marine fuel tax would also be increased from 5 cents to 10 cents per gallon.

Sponsored by Sen. Click Bishop, R-Fairbanks, the bill was amended in committee to include an increase in biennial registrations for electric vehicles from $100 to $200. Hybrid vehicle registrations would increase from $100 to $150.

The Alaska Department of Revenue estimates the tax and fee increases would raise $33.8 million annually. Increased fees on alternative fuel vehicles would initially be about $100,000 yearly.

“This is a meaningful step toward funding the state’s backlog of transportation infrastructure and maintenance needs,” Bishop said in prepared remarks. “A modest increase in transportation funding will improve public safety, stimulate economic growth and provide good-paying jobs for Alaskans.”

Bishop says the state is long past due for a rate increase.

“After adjusting for inflation, an 8-cent fuel tax rate in 1970 is the equivalent in purchasing power to 52 cents today,” Bishop stated. “In other words, Alaska’s fuel tax has lost 82% of its purchasing power since 1970.”

He added that adjusting the state’s tax rate “will take a meaningful step toward our ability to fund the state’s backlog of transportation infrastructure and maintenance needs” along with improving the state’s fiscal stability.

Critics of the bill have voiced concern the additional revenue would not find its way to the stated purpose of benefiting roads.

Bishop said Alaska transportation officials have promised to apply the revenue to roads.

The bill awaits further consideration in the House Transportation Committee.

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