The state House has passed legislation that would suspend Alaska’s 8-cents-a-gallon motor fuel tax for a year to help consumers pinched by high prices at the pump.
The bill was scheduled for its first committee hearing in the Senate this week as lawmakers push toward their May 18 adjournment deadline.
The measure also would suspend to June 30, 2023, the state tax on marine fuel (5 cents a gallon) and aviation gas (4.7 cents a gallon).
The legislation says dealers “shall reduce the cost of fuel to the final consumer” by the amount of the tax break, though there is no enforcement mechanism and the tax is paid by a limited number of fuel wholesalers and distributors, not the retailers and not as a separate, identifiable charge at the pump.
The bill passed the House 36-2 on May 4. Separate from the one-year tax holiday, the measure would increase by about half-a-penny per gallon the surcharge on refined fuel products sold or used in Alaska to help fund the state’s spill prevention and response program.
The only votes against the measure were cast by anti-tax advocates Republican Reps. David Eastman and Christopher Kurka, both of Wasilla. Kurka is running for governor.
In an example of how legislators can amend the original intent of a bill, the measure, House Bill 104, sponsored by Anchorage Rep. Andy Josephson, started out last year as an increase in Alaska’s tax rates. The motor fuel tax has not changed in more than half a century.
But with the state flush with high oil revenues and the public grousing about high prices at the gasoline pump, lawmakers amended the bill in the House Finance Committee in March to eliminate the provision to boost the motor fuel tax rate from 8 cents to 16 cents a gallon. The increase would have raised an estimated $35 million a year that could have gone to increased road maintenance.
The only provision left in the bill by the Finance Committee was the half-cent for spill response and prevention, which would raise about $3.6 million a year. Josephson said the small increase would keep the fund viable. The account is supposed to be self-supporting with collections.
“To me, this is a little bit of insurance,” Big Lake Rep. Kevin McCabe said during House debate on May 4 of raising more money for the fund. “There is a little bit of Boy Scout in all of us,” he said, repeating the scout motto of “Be Prepared.”
The account is used to clean up spills at service stations, dry cleaners and other sites around Alaska. The state spent about $11 million last decade to clean up the former Byford junkyard about 4 miles south of downtown Wrangell.
Without additional revenue, the Department of Environmental Conservation would have to reduce operations and cut positions at the spill prevention and response division, according to its budget presentation to lawmakers.
When the measure reached the House floor last week, Eagle River Rep. Kelly Merrick proposed an amendment to suspend the state’s 8-cent motor fuel tax to June 30, 2023. If approved by the Senate and signed by the governor, the tax holiday would start the first of the month after the governor signs the bill into law.
The House adopted the tax-holiday amendment by unanimous consent, though Josephson told his colleagues it would create a $35 million gap in state revenues for next year. “It takes us from the lowest tax in the country … to nothing,” he said of repealing the 8 cents.
Fairbanks Rep. Adam Wool later tried to amend the bill to restore its original provision to boost the rate to 16 cents a gallon, but not until July 1, 2023, allowing drivers to fill up free from state taxes until then.
“We had our dessert, it’s time to eat our vegetables,” Wool said of the future tax hike. “We don’t pay taxes in this state. … This is not a big leap.”
His amendment failed 14-25.
The one-year tax break will save about $32 for a vehicle owner who drives 10,000 miles a year in a vehicle that averages 25 miles per gallon.
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