Gov. Dunleavy joins calls to suspend the motor fuel tax until July 2023

There is some skepticism about how much impact the fuel tax suspension would make
Gov. Mike Dunleavy is proposing a temporary suspension of Alaska’s 8 cents per gallon motor...
Gov. Mike Dunleavy is proposing a temporary suspension of Alaska’s 8 cents per gallon motor fuel tax until June 2023, according to a letter he sent to the state Alaska House of Representatives on Friday.(Alex Bengel/KTVF)
Published: Mar. 11, 2022 at 1:34 PM AKST|Updated: Mar. 11, 2022 at 7:26 PM AKST
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ANCHORAGE, Alaska (KTUU) - Gov. Mike Dunleavy has joined bipartisan calls from state senators to temporarily suspend the state’s motor fuels tax.

Alaska currently has the nation’s lowest fuel tax of 8 cents per gallon, levied on all motor fuel sold or moved within the state. A smaller tax is applied for aviation and watercraft vessels and heating oil is among several exemptions.

Dunleavy’s proposal to the House of Representative is through an amendment to House Bill 104, and the fuel tax suspension would be effective until June 30, 2023. It would immediately suspend collection of tax on not only motor and marine fuels, but also aviation gas and aviation jet fuel.

“This action, if approved by the Legislature, would provide direct tax relief at the gas pump for Alaskan families and businesses, and help contain the costs of goods shipped within the State,” Dunleavy wrote in a letter to the House on Friday.

House Speaker Louise Stutes, R-Kodiak, said she would consider supporting a fuel tax suspension that typically brings in roughly $30 million per year for the state.

“We are taking a close look at this and are considering any and all options to provide Alaskans further assistance to combat high fuel prices in addition to the $1,300 energy relief check,” she said through a prepared statement.

The Senate unanimously passed a non-binding resolution on Friday, committing to work with the House and the Dunleavy administration to suspend the tax. Sen. Elvi Gray-Jackson, D-Anchorage, introduced the Sense of the Senate on Friday morning.

“Too many Alaskans are worried about how they’re going to put food on the table for their families,” she said.

Sen. Robert Myers, a Republican of North Pole, said he “emphatically” supports suspending the tax. Myers is a truck driver and said he’s heard from those in the industry who say reducing prices would help.

But, there are questions how impactful the tax suspension would be more generally. Two years ago, the Senate was debating doubling the state’s motor fuels tax and there were rough estimates that it ends up costing the average motorist less than $60 per year.

Gas prices in Alaska have also shot up on average by $1.70 per gallon from a year ago. Neal Fried, an economist with the Alaska Department of Labor and Workforce Development, says cutting prices by 8 cents per gallon would likely get “swallowed up” by the recent roller coaster ride of crude oil prices.

The tax is levied on Alaska’s fuel wholesalers and distributors, meaning a gas tax suspension would not be automatically passed onto retailers or consumers.

“It is my sincere desire that this action, if approved, would spur a trend of relief to our fellow Alaskans from both government and private actions,” Dunleavy said in his letter. “In that spirit, I would hope the private firms that distribute fuel are passed on to the user, the Alaskans, as effectively as possible.”

If the tax suspension is adopted, Nicole Reynolds, a deputy commissioner at the state’s tax division, said there would be an outreach effort to wholesalers and distributors to help ensure that those savings are passed onto retailers. She said consumers may not notice the tax is gone if prices continue to fluctuate dramatically.

In late 2008, the Legislature suspended the motor fuel tax for one year, during similarly high gas prices. State data shows highway fuel tax collection dropped by almost 80% in 2009 from the year before, suggesting that the savings were passed on to retailers.

Other states are considering similar “gas tax holidays” and there have been some calls for the federal 18.3-cent gas tax to also be temporarily waived.

Editor’s note: This article has been updated with additional information.

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