Governor, state senators support suspension of motor fuel tax

Gov. Mike Dunleavy and Alaska state senators said Friday they support legislation to temporarily suspend the state’s 8-cents-a-gallon tax on gasoline and also taxes marine and aviation fuels for one year, in an attempt to reduce the hit of rising fuel prices on Alaskans.

No such legislation had been introduced, but Dunleavy, who is running for reelection this year, called for a suspension of the taxes to be added to a bill sitting in the House Finance Committee since last year. That bill would raise the state’s tax on gasoline by 8 cents a gallon. Alaska’s tax rate, which hasn’t changed in half a century, is the lowest in the nation.

Anchorage Rep. Andy Josephson is the sponsor of the tax-increase bill, intended to help raise more revenue for highway maintenance. He said he supports the temporary suspension as long as the underlying purpose of the bill for a permanent tax increase remains intact.

Dunleavy’s proposal to suspend all motor fuel taxes for at least 12 months would cost the state treasury more than $50 million. He proposes immediately suspending collection of state taxes on not only motor and marine fuels, but also aviation gas and aviation jet fuel, and leaving the tax off until June 2023.

Oil prices above $100 per barrel have driven gasoline prices at the pump toward $5 a gallon in urban areas and higher in rural communities.

House and Senate action would be required to suspend the fuel taxes, and the effective date would depend on the legislation.

Based on the average number of miles driven per year in the state — 9,111 miles, according to the Federal Highway Administration — and the average fuel economy of an American vehicle, which is 18.1 miles per gallon, suspending the state tax could save an Alaska driver around $40 per year.

The tax is paid by fuel wholesalers and distributors, not at the retail level, making it difficult for lawmakers to ensure that any tax holiday gets passed on directly to consumers.

In 2008, the Alaska Legislature and then-Gov. Sarah Palin suspended Alaska’s tax amid rising fuel prices when oil was more than $100 a barrel. The tax was reimposed one year later.

Members of the Alaska Senate cast a non-binding opinion vote in support of a one-year tax holiday on Friday, and Dunleavy issued a statement in support of the proposal the same day.

Other states are considering whether to suspend their taxes, and there have been several proposals to suspend the federal excise tax of 18.4 cents per gallon.