Ducey Rejects Idea of Pausing Arizona's Gas Tax as Pump Prices Hit Records

Gov. Doug Ducey has no interest in suspending Arizona's 18-cent-a-gallon gasoline tax, even though doing so would save the typical state resident more than $100 a year. His position comes as the average price of unleaded fuel in Arizona keeps setting records and now sits above $4.60 a gallon.

Ducey described the situation as "like nothing we've seen in our lifetime" and said it is weighing on the economy. He noted that wages are rising, but said they are not keeping pace with inflation.

Rather than offer immediate relief at the pump, the governor argued for boosting energy output. "We should be expanding energy production and not pursuing gimmicks," he said. He added that gas tax revenue pays for road construction and repair projects in Arizona "that need resources."

The Republican governor acknowledged that international fears tied to the war are playing a role in prices. But he said the root of the problem "began with the change in policies in the Biden administration." He pointed in particular to the president's decision, on his first day in office, to cancel the permit for the Keystone XL pipeline, which would have carried Canadian crude oil to Nebraska, where it would have linked with other projects serving Gulf Coast refineries. Asked about short-term fixes, given that building the pipeline would have taken years, Ducey did not offer specifics and said there are "all kinds of opportunity" to add supply.

Other officials are looking at faster options. Governors of six states recently wrote to congressional leaders asking for a suspension of the federal 18-cent gas tax, describing a federal gas tax holiday as "a tool in the toolbox to reduce costs for Americans." Lawmakers from both parties in some states have also called for pausing their own state fuel taxes. Ducey did not support either approach. At the federal level, he said Congress should approve Keystone and override the president's decision. "They ought to bring supply to the demand that's out there," he said.

The Arizona Department of Revenue estimates the average motorist pays $8.60 a month in state gasoline taxes. The Arizona Department of Transportation says a suspension would cost about $540 million a year in the Highway User Revenue Fund, money that supports the agency's operating and capital programs and is also shared with county and local governments.

ADOT spokesman Doug Nick said the harm would extend beyond the lost dollars. The agency borrows to start projects that would otherwise wait years for funding, and it pledges future gas tax revenue to repay that debt. Nick said removing that revenue could lead to a lower bond rating, which would raise borrowing costs because lenders would ask for higher interest rates.

Arizona has not gained from the spike in fuel prices because its tax is a flat 18 cents per gallon, a rate unchanged since 1991. In 2020, the House Transportation Committee backed a plan from then-Rep. Noel Campbell, R-Prescott, to raise the tax in 6-cent steps to 36 cents by 2023 and then tie it to inflation. Legislative leaders declined to bring it to the full House, and Ducey was cool to the idea. "You know my feelings about taxes," he said.

The governor also voiced no worry that pump prices climb quickly during supply scares but do not appear to fall when crude oil prices drop. He does not think an inquiry into possible price fixing is needed. "Let's watch the market for a while," he said. "The market typically works."