Fuel tax increase effort returns in Alaska

September 8, 2021

Keith Goble


A renewed effort at the Alaska statehouse would raise the state’s fuel tax rate for the first time in more than one half-century.

The state charges a fuel tax of 8 cents per gallon on gas and diesel purchases. An additional 0.95-cent surcharge is added to the tax.

Three Alaska Senate Democrats have introduced a bill to double the fuel tax rate from 8 cents to 16 cents. The bill is part of a special session called by Republican Gov. Mike Dunleavy to address fiscal policy.

The state faces a $285 million budget shortfall for fiscal year 2023.

First attempt faltered

Earlier this year during the regular session, a bill advanced from the House Transportation Committee to double the state’s fuel tax. The bill later died in the House Finance Committee without getting a vote.

At the time, Rep. Andy Josephson, D-Anchorage, said the current tax rate is well below the inflation adjustment since 1970. The bill sponsor pointed out when adjusted the fuel tax rate imposed 51 years ago should be set at 54 cents today.

“Alaska’s fuel tax has lost 85% of its purchasing power since it last changed,” Josephson stated.

His bill included a provision to increase the surcharge on fuel by 0.55 cents to 1.5 cents per gallon.

The Alaska Trucking Association spoke in favor of Josephson’s bill but did voice concern about the details. Joe Michel, executive director for the group, cited concern about making sure certain revenue is earmarked solely for highway maintenance.

A separate provision in the bill called for increasing biennial registrations for electric vehicles from $100 to $200. Hybrid vehicle registrations would increase from $100 to $150.

Second time a charm?

Senate Minority Leader Tom Begich, D-Anchorage, Sen. Elvi Gray-Jackson, D-Anchorage, and Sen. Donny Olson, D-Golovin, are the sponsors of the renewed legislation to double the fuel tax rate.

The renewed effort, SB3002, does not include the provision to increase the fuel surcharge. Also excluded is the provision on electric and hybrid vehicle registrations.

The Alaska Department of Revenue estimates the fuel tax would raise an additional $33 million annually for transportation work. Most of the revenue would be applied for highway maintenance.

The Senate Resources Committee is scheduled to hold three hearings this week on SB3002. LL

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