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Providing coverage of Alaska and northern Canada's oil and gas industry
March 2017

Vol. 22, No. 12 Week of March 19, 2017

Legislature debates fuel tax increase

The Alaska Legislature is debating increases to state taxes on motor fuels. Gov. Bill Walker introduced bills for the proposed tax increase: House Bill 60 in the House and Senate Bill 25 in the Senate. In both chambers the bills have been passed to the respective finance committees for consideration.

The bill proposes increasing the taxes in two stages, on July 1, 2017, and on July 1, 2018.

The first stage would involve a tax increase from 8 cents to 16 cents for vehicles used on highways; 4.7 cents to 9.4 cents per gallon for aviation gasoline; 3.2 cents to 6.4 cents per gallon for jet fuel; and 5 cents to 10 cents per gallon for watercraft motor fuel. In the second stage, highway fuel tax would go up to 24 cents per gallon; aviation gasoline to 14.1 cents; jet fuel to 9.6 cents; and watercraft fuel to 15 cents. A discount of 6 cents per gallon for fuel blended with alcohol, if that blended fuel is required to attain state or federal mandated air quality standards, remains unaltered.

In letters to the House and Senate, Walker acknowledged that the proposed tax increases appear high.

“While the proposed tax increase may appear to represent a significant increase, the tax rates on motor fuel sold or transferred within the state have not been raised in many years; for example, the tax on highway fuel has remained at 8 cents a gallon since 1970,” Walker wrote. “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 would also establish a new transportation maintenance fund within the state’s general fund. The new fund would incorporate the existing special highway fuel tax account, the special nonpublic highway use account, the special nonpublic highway use account and the special watercraft fuel account. The new fund would clarify how motor fuel taxes are accounted for, to allow the Legislature to make appropriate use of the tax revenues. Funds collected from motor fuel taxes are preferentially used for the maintenance and upgrade appropriate sectors of state transportation infrastructure.

- ALAN BAILEY






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