HB 1002: Gas Tax Increase

 

Bill Status

2/16  Passed by the Indiana House of Representatives (61-36)


Bill History


 

 

Executive Summary

HB 1002 provides for a one-time fuel tax rate increase using a multiyear index factor based on the last time the particular fuel tax rate was increased and the current fuel tax rate per gallon. (Gasoline tax is currently $0.18, special fuel tax is currently $0.16, and motor carrier surcharge tax is currently $0.11.) Limits the one-time increase to $0.10 per gallon.  Provides for an annual rate increase in fuel tax rates based on an annual index factor.  Increases alternative fuel decal fees by 50%.

 

Analysis

HB 1002 would likely raise the 18 cent gas tax in Indiana by 10 cents per gallon for a total of 28 cents per gallon and would likely raise taxes even more over time.  Unfortunately HB 1002 would raise taxes without a proper infrastructure plan.  The Indiana General Assembly approved the FIRSST Commission to look at infrastructure needs.  In finding No. 3 of the commission it casts serious doubt on the thoroughness of the INDOT work plan.  Projects, in other words, are not certain, let alone shovel-ready.  But the taxes would begin to flow July 1.  And that billion dollars in new taxes would be on top of the billion dollars approved last year in HEA 1001. Taxes first, roads later is not good public policy.

If HB 1002 passes into law the Indiana General Assembly would be acting before the new White House and Congress enacts a major infrastructure initiative, a centerpiece of the campaign and public program of the new Trump-Pence Administration.  Instead of passing HB 1002 this year it seems more prudent to use the $1 billion approved last year and await the federal initiative.   Additionally, the Indiana General Assembly could task INDOT with designing a plan to take the new federal infrastructure policy into account while addressing the reservations of the FIRSST Task Force.  That way the IGA will have a plan and a price tag BEFORE asking taxpayers for more of their hard earned dollars.

Indiana has a well-deserved reputation across the nation for solving big problems without raising taxes.  HB 1002 would squander that reputation.  At a minimum IEDC would need to take down all the billboards along the Indiana-Illinois state line, because we could no longer woo Illinois businesses to Indiana based on a tax argument. 

The gas tax increase in HB 1002 is regressive, meaning it impacts lower-income Hoosiers disproportionately, and this is especially true for younger, larger families who are active.  The tax will also get larger over time because of the indexing and will increase even more when gas prices increase in the future and the sales tax takes in even more dollars.  Young families who are faithfully raising the next generation are least able to absorb this tax increase, yet it would hit them very hard.

               

Conclusion

Our last two major highway expansions (1993) and (2005) were funded without major gas tax increases.  The Major Moves initiative was especially creative and forward-thinking. Before the Legislature resorts to raising taxes, they should explore all options, including privatization initiatives and asset sales, tolls and user fees, and making sure all gas taxes collected (including the sales tax) are spent on road and transportation needs, with future tax gains from record employment and an improving economy replacing those dollars in the General Fund in coming years.

IFI opposes HB 1002.