Area Democrats in the state legislature are continuing to call for a pause on the state’s gas use and excise taxes until July.
As lamenting the price of gas has become common talk in offices, bars and around the kitchen table, Hoosiers have been paying 74.5 cents in taxes per gallon this month. Putting a hold on the tax, a combination of two state taxes, would decrease the gas tax by as much as 56.1 cents a gallon. That $4.75 could drop to under $4.20 if the Legislature acts.
The Indiana Department of Revenue announced last month that the state’s gasoline use tax rate in May will be 24.1 cents per gallon. The state gas excise tax guzzles 32 cents per gallon and a federal gas tax rate of 18.4 cents per gallon, which amounts to the 74.5 cents in taxes.
The state’s gasoline use tax is calculated by 7% of the average per-tax price of a gallon of gas in Indiana over the previous month. There is no cap on this tax rate, which means as gas prices increase so does the state’s gasoline use tax.
The state gasoline excise tax is set at 32 cents per gallon. The state’s previous gasoline excise tax rate was 18 cents per gallon, but in 2017 the Republican-led legislature approved a 10-cent gas excise tax hike with an increase by 1 cent per gallon annually.
As of Wednesday, the national average for gas is $4.404 per gallon and Indiana’s average for gas is $4.406 per gallon, according to American Automobile Association.
State Rep. Earl L. Harris Jr., D-East Chicago, said state leaders should take action to lower the gas price.
“As a member of the House Ways and Means Committee, it’s important to me that we act in the best interest of Hoosier families while doing so responsibly,” Harris said. “Our plan to temporarily suspend the gas tax does just that by using our budget surplus to make up for lost road funding.”
The state budget surplus currently stands at almost $5 billion.
State Rep. Mike Andrade, D-Munster, said it is “unacceptable” for the state to collect gas taxes “when Hoosiers are hurting right now.”
“Every time Hoosiers pay at the pump, our state reaps revenue dollars. My Republican colleagues have celebrated Indiana’s historic $5 billion surplus — so why not put it to work for everyday Hoosiers? Either Gov. Holcomb must suspend the gas tax temporarily or the General Assembly should take action to do so on Technical Corrections Day in a few weeks,” Andrade said.
The legislature is meeting May 24 to vote to override Holcomb’s veto of a bill that would prohibit transgender girls from participating in girls teams or sports.
State Rep. Carolyn Jackson, D-Hammond, said Hoosiers “deserve the ability to save money and put food on the table for their families.”
“Suspending the gas tax would give Hammond residents a bit of a break at the pump and is needed now more than ever. We have $5 billion in reserves — let’s act to put Hoosiers’ money back in their pockets,” Jackson said.
State Rep. Mike Aylesworth, R-Hebron, said he would be open to pausing portions of the state gas tax because the state’s “financial situation is stable.” But, Aylesworth said he would not support pausing all state gas taxes because portions of the gas tax funds are used for road construction projects.
“We just have to be careful we don’t interrupt the road construction spending,” Aylesworth said. “We’ll see what our side of the caucus has to say when we’re there next.”
Indiana University Northwest Associate Professor of Political Science Marie Eisenstein said politicians seize on gas prices around midterm elections because voters are “pocket book voting.” For elected officials, the “simple math” of elections is if voters are financially secure then the political party in charge is likely to get the credit and be reelected.
“This is something people vote on. They may not say they vote on gas prices specifically, but they vote on pocket book issues. If things are going well for them financially, they are much more inclined to the people who are in office, the administration that’s at the helm, than they are if things are not going well financially,” Eisenstein said.
Eisenstein said in the last 10 years people have stated that gas prices under Democratic presidents is higher than Republican presidents because gas prices were lower when former President Donald Trump was in office compared to former President Barack Obama and now President Joe Biden. But, historically, that perception hasn’t been expressed, she said.
High gas prices are not strictly a result of the war in Ukraine, Eisenstein said. Given COVID-19 stimulus spending, which both Democratic and Republican presidents issued, inflation is impacting all goods people purchase, she said.
“It’s a consequence that, ‘Look, things that needed to be done during the pandemic may have needed to been done, but now we have to figure out how to counter balance it,’” Eisenstein said.
Indiana University Northwest Associate Professor of Economics Micah Pollak said gas prices are determined by supply and demand and the global market. Indiana is in the minority of states that tax gas, with only 15 other states taxing gas, Pollak said, adding that now could be a time to pause the state gas taxes as the state has a large surplus.
“It’s a good gesture. It’s something that will help the average person in Indiana, especially if you rely on driving a lot, which is something that certainly lower income house holds do. They may not have the option of working from home,” Pollak said. “It’s definitely beneficial to the average Hoosier, and there is a surplus so we don’t necessarily need the tax revenue as desperately.”
But, in the grand scheme of things, pausing the state gas taxes won’t help much if gas prices continue to increase, Pollak said. Given inflation, the war in Ukraine, and COVID-19 lockdowns in China, gas prices are not likely to decrease soon, Pollak said.
“It’s a nice gesture. I don’t think it’s going to fundamentally change or solve the problem. It’s going to alleviate the pain at the pump a little bit, and every little bit helps ... but it’s not going to be a long-term solution,” Pollak said.