Indiana lawmakers divided on which taxes to increase for highway maintenance

During the last legislative session the Republican-controlled Indiana House and Senate opted not to increase taxes during an election year and instead provided $800 million over two years as a stopgap.

Lawmakers are expected to consider an increase in the state’s gasoline tax and cigarette tax to fund road improvements during the 2017 legislative session. 

Currently the Indiana gas tax is 18 cents per gallon with a 7 percent sales tax and the cigarette tax is 99.5 cents per pack.

Sen. Tim Lanane, D-Anderson, the minority leader in the Indiana Senate, said lawmakers have to look at a realistic way to sustain the roads and not have to come back in five or 10 years.

“We have to look at who is using the roads and who is funding them,” he said. “A gas tax may be the way to do that, but we also have to consider alternative fuel vehicles. Everyone should pay their fair share.”

Lanane said Gov.-elect Eric Holcomb has to take the lead on any increases in taxes.

“There will be pushback from Republicans and Democrats,” he said.

Using an increase in the cigarette tax for the roads is diverting funds from health programs, Lanane said.

Rep. Terri Austin, D-Anderson, opposes an increase in the cigarette tax to go to the roads.

“Those funds should go to mental health, addiction services and to improve the overall health of Hoosiers,” she said.

Austin said there has to be an increase in the gasoline tax but is unsure of how much it should be raised.

“We need a broader array of funding,” she said. “Raising the gas tax is a losing proposition because the revenues decline as vehicles become more fuel efficient.”

Another crisis facing the state, she said, is funding for necessary improvements in the state’s water and sewer systems.

“I’m not willing to commit to any increase in the gasoline tax unless funds are provided to local units of government,” she said.

Rep. Bob Cherry, R-Greenfield, also questioned the ability of increasing the cigarette tax to fund roads on a long-term basis.

“We want people to quit smoking by raising the tax,” he said. “Smoking is a personal choice. But if people quit smoking, the revenues generated will decrease.”

Cherry said Holcomb is not supportive of raising either of the taxes. 

He noted in 2003 the Legislature raised the gas tax by 3 cents with one-third going to the state, a third to local units of government and the final third for bonds.

“We have one of the lowest gas taxes in the country,” Cherry said. “We have to look at different ways to tax gasoline.”

Cherry said the sales tax on gasoline is currently 7 cents for each $1, so the state will get more revenue as the price increases.

Rep. Melanie Wright, D-Yorktown, said lawmakers need to consider how the funds are currently being used.

“Any increase would have to go back on the roads,” she said. “There are programs being funded that have nothing to do with the roads.”

Wright said lawmakers need to take an inventory and what is already in place for road improvements.

Rep. Tony Cook, R-Cicero, said he supports increases in the taxes because the state depends on those taxes for improvements to the roads.

“We have to maintain a better infrastructure,” he said. “We’re known as the ‘Crossroads of America’ and have to do it.”

Cook said an increase of $1 in the cigarette tax cannot be looked at as a long-term solution.