Multi-billion dollar transportation package would strike down repeal of fuel export tax

Feb 15, 2022, 5:07 AM | Updated: 8:55 am
An oil refinery near Anacortes, Washington. (Flickr)

As Washington state’s Legislature deliberates over its ambitious transportation package dubbed Move Ahead Washington — a 16-year spending plan that dovetails with carbon reduction legislation passed in 2021, and emphasizes car-alternative transportation in the form of public transit, hybrid electric ferries, high speed rail, and cycling and pedestrian safety improvements— its source funds have been hotly contested along party lines.

Washington Democrats unveil expansive $16 billion transportation package

Traditionally, revenue for the state’s transportation budget is largely sourced through motor vehicle fuel taxes (MVFT) — Washington state levies a tax of nearly $0.50 a gallon for gasoline — and subsequent taxes to fund transportation options that will not materialize in the state for years or decades is an impossible request for an economy that is still in a lopsided recovery from the pandemic. Democrats, instead, are funding their proposal in part through a tax on exported fuel to neighboring states.

Washington state makes up 3.3% of the United States’ capacity for refined petroleum exports, according to 2019 data. While local consumers struggle with gas prices above $4 a gallon in the Seattle area, in part due to one of the highest gasoline taxes in the union, fuel exported outside of the state is exempt by law from the entire $0.49 per gallon MVFT. Move Ahead Washington repeals that exemption, effectively imposing a $0.06 per gallon MFVT on fuel exports to states like Oregon and Alaska that have lower gasoline taxes than Washington.

That tax was largely the subject of Senate transportation committee hearings Monday, Feb. 14. Democrats fielded and ultimately rejected an amendment from Sen. Curtis King (R- 14th District), which sought to repeal the tax, and approved an amendment from Sen. Annette Cleveland (D-49th District), which delayed the requirement until June 30, 2023 (previously Feb. 1, 2023).

“I would tell you that we’ve heard from Oregon, … Idaho, and … Alaska, where we sell most of this gas. They are not jumping with glee. I can tell you that,” Sen. King said Monday. “At least Oregon has talked about things like retaliation. I think there’s a variety of problems with this.”

That “retaliation” references nebulous comments last week made by Oregon state Sen. Lee Beyer, a Democrat and co-chair of the state’s Joint Transportation Committee, a spokesperson with Sen. King told MyNorthwest.

Legislative staff estimate that the tax would add, over a 16-year period, roughly $2 billion to the state’s Motor Vehicle Fund.

“I do think that this is an oversight, that we don’t have the same kinds of tax bases as other states, and we need to make sure that we have a balance of revenues that make sense for Washington residents,” Sen. Rebecca Saldana (D- 37th District) said.

“In particular, the fact that more than about half of the oil that is refined in this state goes out and without any benefit to our local transportation system; it has a huge impact on the residents that live in that area, as well as an impact on us being able to make sure that we preserve and maintain our transportation system,” Saldana continued.

Ultimately, the tax on fuel exports would mostly fall on the shoulders of Oregon, as its MVFT is significantly lower than Washington state’s. Tax revenue would also be generated from Idaho and Alaska. While Washington exports fuel to California, its MVFT is higher, and, therefore, the tax would not be applicable.

“One of the sources of revenue included in this package, exported fuel tax, is a source of grave concern to our partner state of Oregon,” Sen. Cleveland noted. “They’ll be paying a disproportionate share of this tax to help fund our Move Ahead Washington package while also working to fund their own portion of the I-5 bridge replacement, which seems overly burdensome and unfair to me.”

With the delay offered by Cleveland, Senate Bill 5974, one of several under Move Ahead Washington, passed through to the rules committee. Tuesday, Feb. 15, is the cutoff date for bill passage in the house of origin, and March 10 is the last day of this legislative session.

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Multi-billion dollar transportation package would strike down repeal of fuel export tax