Report: Alaska gasoline tax rate would stay below US average even under proposal to triple it

JUNEAU — Alaskans spend less than one-tenth of 1 percent of their personal income on the state's rock-bottom gasoline tax, according to a new report, released as the Legislature takes up Gov. Bill Walker's proposal to triple the tax.

Walker's proposal to hike the 8 cents-a-gallon motor fuel tax to 24 cents would still leave Alaska's tax rate below the national average, according to the report, from the left-leaning Institute on Taxation and Economic Policy in Washington, D.C.

[Read the report]

Alaska's gasoline tax is the lowest in the country. It hasn't increased since 1970, making the Alaska tax rate 17 years older than the next oldest, in Oklahoma, where lawmakers last adjusted it three decades ago, the report found.

The report, released Wednesday, makes a case for why lawmakers, facing a $3 billion budget deficit, should act on Walker's proposal. The legislation would bring combined state and local sales taxes on motor fuel to about 28 cents per gallon, or about 3 cents below the national average.

Another finding in the report is that Alaska's gasoline tax rate, adjusted for inflation, is now the lowest since 1970, since the purchasing power of 8 cents has fallen 81 percent in the ensuing decades.

"Alaska's the only state that hasn't addressed this since the 1970s," Carl Davis, the institute's research director, said in a phone interview Wednesday.


Walker, in a prepared statement, said, "While I am no fan of taxes, I am a fan of a stable fiscal foundation for our state."

Walker's proposed tax increase, phased in over two years, would raise about $80 million a year once it's fully in place. The legislation would designate the proceeds to transportation projects, though lawmakers could always budget the money differently, because of Alaska's constitutional ban on the dedication of funds.

Last year, a similar proposal from Walker failed to come to a vote in either the House or Senate. But both chambers appear poised to move quickly on the legislation this year, with hearings in the House and Senate transportation committees planned for next week.

"I think it's time we look at not having the lowest fuel tax in the nation," said Rep. Adam Wool, D-Fairbanks, co-chair of the House Transportation Committee. "I think many people are receptive to it."

Wool said he hasn't heard any opposition from industry groups. The Alaska Trucking Association will likely "look favorably" on the legislation, said Executive Director Aves Thompson.

"We are willing to be part of the solution here, rather than part of the problem," Thompson said in a phone interview — though he added that his organization wants any tax increase to come as part of a broader plan to stabilize the state budget.

Some transportation companies, however, have opposed Walker's legislation, which also includes a tax increase on aviation and boat fuel.

Last year's bill drew opposition from Delta Air Lines and UPS Inc., and a UPS spokesman, Nick D'Andrea, said the company remains opposed to elements of Walker's legislation this year.

UPS supports the increase in the gasoline tax since "we all use the roads in Alaska," D'Andrea said.

But the company doesn't want to pay more for aviation fuel because it already is assessed landing fees at state airports, which aren't paid by smaller planes at other state airports, D'Andrea said.

Levying those fees for smaller planes would be a more equitable way to raise cash, D'Andrea argued.

"We obviously are sympathetic to the cause of the state," D'Andrea said. "I just think this may not be the best option."

Nathaniel Herz

Anchorage-based independent journalist Nathaniel Herz has been a reporter in Alaska for nearly a decade, with stints at the Anchorage Daily News and Alaska Public Media. Read his newsletter, Northern Journal, at natherz.substack.com