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Gas tax bill gets hearing, but no action

Despite Parnell push, legislators appear reluctant to suspend tax

Posted: March 28, 2012 - 12:02am
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Sen. Dennis Egan, D-Juneau, questions Commissioner Marc Luiken of the Alaska Department of Transportation and Public Facilities on the administration's request to suspend Alaska's 8 cents motor fuel tax during the Senate Transportation Committee on Tuesday.  Michael Penn/Juneau Empire
Michael Penn/Juneau Empire
Sen. Dennis Egan, D-Juneau, questions Commissioner Marc Luiken of the Alaska Department of Transportation and Public Facilities on the administration's request to suspend Alaska's 8 cents motor fuel tax during the Senate Transportation Committee on Tuesday.

Transportation Commissioner Marc Luiken on Tuesday urged legislators to think about the money they could save Alaskans and Alaska businesses if they agree to suspend the state’s motor fuels tax.

“There are a lot of Alaskans who 8 cents a gallon for highway use and 5 cents for marine use is a big deal for them,” Luiken told the Senate Transportation Committee.

Alaska has some of the highest gasoline prices in the nation, and Gov. Sean Parnell has proposed suspending the state’s 8-cent-per-gallon highway fuel tax.

Among legislators skeptical about the wisdom of suspending the tax was Sen. Dennis Egan, D-Juneau, who pointed out Alaskans already pay less than anyone in the nation in gas tax to fix their potholes.

“It seems to me that 8 cents a gallon is a pretty good deal,” he said.

Luiken, though, said the gas taxes paid by Alaskan drivers don’t go to fixing roads. Instead they go into the state’s general fund, and the Legislature then appropriates general fund money to fix the roads and run the department.

“There is no direct correlation between 8 cents and my budget that ... money goes straight into the general fund,” he said.

Suspending the tax would save drivers and others an estimated $35-$40 million a year, with the money coming out of savings instead.

The state already uses mostly oil tax revenue, not motorist gas taxes, to pay for roads, Luiken said.

Parnell proposed the two-year gas tax suspension, and said it would help defray the impact of rising gasoline prices, he said. Legislators in both the House and Senate didn’t like the idea however. Suspending the tax would save Alaskans relatively little and undermine efforts by the state’s congressional delegation to bring a disproportionate share of federal highway dollars to Alaska, they said.

Luiken said those fears shouldn’t come about.

“State motor fuel tax has no direct link to federal dollars,” he said.

“Historical data shows those states that suspended or lowered their fuel tax saw no penalty to their federal funding,” Luiken said.

Suspending the tax would also help the state’s largest industries, including tourism. Princess Cruises and Alaska Airlines have both endorsed it, he said.

CIRI Alaska Tourism Corp.’s Paul Landis told the senators his company strongly supported the suspension and tourism industry profit margins need help.

“While many tourists understand the rising energy costs, there’s a limit to what they’re willing to pay in terms of surcharges,” he said.

A few years ago, the state suspended the tax when prices were high. Luiken said history showed that tax cut had been passed on to consumers.

Department of Law’s Ed Sniffen said he could only partially confirm that. Surveys in Anchorage and Fairbanks showed there had been an initial decline of 8 cents.

Over the longer run, however, it is difficult to tell if the price creeps back up, he said.

Some research outside Alaska showed that 60-80 percent of gas tax suspensions are passed through, he said.

“We know that suspension does have a positive effect on consumers,” Sniffen said.

Transportation Committee Chairman Sen. Albert Kookesh, D-Angoon, closed the committee meeting without action on the tax suspension bill. A similar bill in the House, where there seems to be little support. is still awaiting a hearing.

“There is very little support for the governor’s bill,” said House Majority Leader Alan Austerman, R-Kodiak.

With legislative leaders fearing future declines in oil revenues, it didn’t seem prudent for the state to give up a source of income, he said.

In addition, the concerns of the state’s congressional delegation about the message a tax suspension sent also plays a role in the reluctance to pass the bill, he said.

“I seriously doubt that bill will come out of committee,” Austerman said.

Luiken said suspending the gas tax was part of a consistent tax policy from the Parnell administration.

“The bottom line is there is not a compelling need to collect a motor fuel tax at this time,” he said.

• Contact reporter Pat Forgey at 523-2250 or at patrick.forgey@juneauempire.com.

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