News-Miner opinion: A doubling of Alaska’s motor fuel tax sounds ominous, indeed. Anytime the words “tax” and “doubling” get together can’t possibly be a good time.
The state’s motor fuel tax, however, hasn’t changed since 1970. It’s lost 82% of its actual financial value over the half-century since it was enacted, having been eroded by the ensuing decades of inflation, according to a document accompanying proposed legislation to increase the tax.
And the actual amount of the tax itself seems, at first look, minimal. As it stands now, the tax is 8 cents per gallon for highway fuel, for both gasoline and diesel, and 5 cents per gallon for marine fuel. How much would that be when you pull into the gas station? Let’s say your full-size pickup — one of the most prevalent vehicle types in the Fairbanks region — needs 25 gallons. You’re paying $2 in state fuel taxes now on those gallons.
You’d be paying $4 if the tax doubles, as called for in Senate Bill 115, approved by the state Senate last week. And if you buy 25 gallons every two weeks, you’d be paying an extra $52 a year in state fuel taxes.
Alaska would still be below average if SB 115 becomes law. A fact sheet accompanying the bill cites a January 1, 2020 report by the American Petroleum Institute showing that the average state motor fuel tax is 25.01 cents for gasoline and 25.86 cents for diesel.
This isn’t the first time there’s been discussion of raising the fuel tax in Alaska. Former Gov. Frank Murkowski in 2003 proposed an increase to 20 cents per gallon when the state was also facing a budget crisis. It didn’t get off the ground.
As with many things, raising the motor fuel tax has pluses and minuses.
Why is the increase being considered? The reason is because Alaska needs the money. But is finding small pots of money such as this the way to go? Increasing the fuel tax would raise an additional $35 million annually, according to the office of Fairbanks Republican Sen. Click Bishop, the bill’s sponsor.
Let’s put that $35 million in the context of $1.5 billion, the amount that Gov. Mike Dunleavy proposes taking out of the Constitutional Budget Reserve to fill the hole of that size in his proposed budget. The additional revenue raised by the increase the fuel tax would be just 2.33% of the total budget shortfall.
Yes, there’s an argument that every little bit helps, but some of those little bits can hurt. In this instance, the increase would disproportionately affect lower-income Alaskans, self-employed drivers and independent contractors who drive for a living.
There’s an arguable benefit that the money will help transportation projects since the additional revenue would come from transportation fuels.
State law says the money must be deposited into three accounts within the general fund for the following three purposes: water and harbor facilities; maintenance of highways and construction of highway projects; trails and shelter construction and maintenance.
Now for some points against the increase.
Although state law requires the fuel tax be deposited in those three accounts within the general fund, it’s not secure there. The Legislature can do what it wants with that money. That’s because the Alaska Constitution, in Article IX Section 7, prohibits revenue from “any state tax or license” being dedicated to any special purpose except when required by the federal government for state participation in federal programs. Absent any federal requirement, the Legislature can spend the fuel tax money on anything it wants.
Another argument against increasing the highway and marine fuel taxes is that Alaska is the only state without a statewide sales or personal income tax, so an increase in the motor fuel tax shouldn’t be difficult to swallow. And Alaska is the only state, of course, that hands out a financial dividend every October to its qualifying residents.
Perhaps this motor fuel tax legislation should include a provision that it is automatically repealed upon imposition of a state sales tax or the reimposition of the state income tax.
That leads us to this final point: This motor fuel tax increase idea might never have surfaced had the Legislature done what it should have done several years ago: agree on some sort of a broad statewide tax.
And that is perhaps the biggest point of all.