30 Laws in 30 Days: Gas tax hike funding massive highway construction program

By Taylor Brown
TheStatehouseFile.com

Editor’s note: This is the 27th in a series of stories about new laws that are taking effect, most of them on July 1.

INDIANAPOLIS – Hoosiers will be seeing more highway construction and better roads in the coming years, but they’ll also be seeing the price at the pump rise.

Gov. Eric Holcomb signed House Enrolled Act 1002 into law in late April that will increase the gas tax and will seek federal approval to turn interstate highways into toll roads. Tolling the state’s highways is a way to collect funds from out-of-state drivers passing through without paying anything to Indiana unless they stop and make a purchase.

The construction will start as soon as this summer to improve the infrastructure of the “Crossroads of America.”

“I can assure you and all of you that come July you are going to smell asphalt morning, noon and night,” Holcomb said when he signed the bill into law.    

Under the law, Hoosiers will pay an additional 10 cents per gallon of gas in taxes. Currently, the gas tax in Indiana is 18 cents and beginning July 1 the rate will be 28 cents. The per gallon tax will be pegged to the rate of inflation after the first year, but cannot be raised more than a penny each year.

The legislation will create $1.2 billion in additional revenue by 2024 through new taxes and fees, with $350 million of the revenue going to fund local roads and $850 million funding state roads and bridges.

Holcomb said this will be the largest non-stop, sustained building program the state has ever seen and one of the largest in the nation.

“It’s going to truly connect Indiana to the world and help bring the world back to Hoosier soil,” Holcomb said.

Legislators, such as Speaker of the House Brian Bosma, said this road-funding plan will not pave the roads on the backs of Hoosier children.

“My colleagues… have gotten a little tired of a mantra that I’ve had over the last four years to fund roads, not for the next election, but for the next generation,” said House Speaker Brian Bosma, R-Indianapolis. “We have done just that.”

Not everyone is thrilled with the prospect of a higher gas tax, like Hoosier driver Paige Lundy, but she recognizes the need for the funding. Lundy isn’t happy she’ll have to pay more at the pump, but said she thinks the better roads will be worth the extra tax.

She said she doesn’t see many Hoosiers noticing the tax increase unless they are very closely watching their spending or if they follow very closely a budget they make.

“I just have to get places,” Lundy said.

Lundy wishes the legislature would have followed through with the House’s one dollar per pack cigarette tax increase that was part of the original proposal. However, cigarette tax was removed from the budget in the Senate.

Sen. Luke Kenley, R-Noblesville, said he was worried about what the federal government will do with healthcare funding over the next few years and would rather keep the cigarette tax as an option for later. He chairs the Senate Appropriations Committee.

Sen. Luke Kenley, R-Noblesville

“At that time, the cigarette tax would be a logical thing to look at,” Kenley said. “But today my feeling is that if you don’t need a tax, don’t enact it.”

Instead, Kenley went with the biggest investment in roads of state history. Holcomb said this investment in roads is bigger than the Major Moves initiative former Gov. Mitch Daniels launched in 2005. That plan poured money into improving and expanding Indiana’s highway infrastructure over 10 years.

Willard Witte, an associate professor emeritus in economics at Indiana University, said the gas tax will have a significant impact on the money available for road funding, without affecting many Hoosiers.

“I don’t think it will have much of an effect basically because gas prices jump around a lot and a 10-cent change isn’t much,” Witte said.

Witte explained that conditions of the oil and gas markets will play into how many people notice the tax increase. He said that if the week of July 1, when the law goes into effect, conditions in the overall oil and gasoline market produce a 20 percent rise and then you have the 10 cents on top of that, so gas prices go up 30 cents in that week, then most people will notice. However, if gas prices drop 10 cents then there won’t be any change and Hoosiers will not notice at all.

“Ten cents in gas these days is just not much,” Witte said.

Taylor Brown is a reporter for TheStatehouseFile.com, a news website powered by Franklin College journalism students.

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