SB 115, sponsored by Sen. Click Bishop of Fairbanks, would raise the motor fuel tax from 8 cents to 16 cents beginning in July (and from 5 cents to 10 cents for marine fuel), a plan that would raise about $35 million for the state treasury.
The Senate Finance Committee will hear details of the plan on Monday during its scheduled meeting at 9 am. Public testimony will be heard. Introduced last year, it has no other committees of referral, and may be fast-tracked for approval this session.
Currently, the 8-cent tax is levied on diesel and gasoline purchased for highway use. Diesel and gas for marine use is taxed at 5 cents per gallon, aviation fuel is 4.7 cents per gallon, and jet fuel is 3.2 cents per gallon.
Under the proposal, the tax rate would double for highway and marine fuels, but not increase for aviation or jet fuels.
The state fuel tax is levied in addition to any local sales taxes. The State has a refined fuel surcharge of .95 cents per gallon, appling to refined fuel when it is first sold, transferred, or used in Alaska.
Alaska’s fuel tax rate was enacted in 1970 and has remained unchanged, which means it has lost 82 percent of its purchasing power, Bishop notes. With the proposed increase, Alaska would still have the lowest marine fuel tax in the nation, but instead of the lowest gas tax, it would be the third lowest.
According to a recent report by the American Petroleum Institute, the national average for state motor fuel tax is 25.01 cents for gasoline and 25.86 cents for diesel.
The additional revenue for the State would be placed into the General Fund, but directed to a specific account. AS 43.40.010 directs taxes levied on fuel for a) watercraft, b) road vehicles, and c) off-road vehicles be deposited into three separate accounts that are designated for water and harbor facilities, maintenance of highways and construction of highway projects, and trails and shelter construction and maintenance.
Exempt from the tax is fuel sold to heat private homes or commercial buildings; for use by federal, state and local government agencies, and charitable institutions; for sale or transfer between qualified dealers; for use in foreign flights (jet fuel), and exports; and for fuel sold as bunker fuel (residual fuel oil or #6 fuel oil).
Motor fuel for off-road use (other than fuel used for aviation or watercraft) is eligible for a partial refund of 6 cents per gallon. Refund claims must be submitted within one year of the date of purchase.