INDIANAPOLIS (Jan.13, 2016) – It’s not often that Republican Gov. Mike Pence and Indiana House Democrats agree on matters of fiscal policy.
But that appears to be the case regarding a House Republican plan to raise taxes on gas and cigarettes in order to increase funding for Indiana roadways.
The House Roads and Transportation Committee on Wednesday heard public testimony on House Bill 1001. The bill was authored by Rep. Edmond Soliday (R-Porter County). Under the proposal, the state’s gas tax would increase for the first time in more than a decade to 22 cents per gallon, a four cent increase. Diesel fuel would increase seven cents per gallon. The bill would also direct more of the money collected from the gas tax directly to road repairs and maintenance.
Testimony in the hearing came the day after Pence spoke on the issue during his annual State of the State Address.
“I think when you have money in the bank and the best credit rating in America, the last place you should look to pay for roads and bridges is the wallets and pocketbooks of hardworking Hoosiers,” Pence said. “Let’s invest in our roads and maintain the Crossroads of America, and let’s do it without raising taxes.”
The governor’s remarks seemed in line those of House Democratic Leader Scott Pelath (D-Michigan City).
“There is less reason to be enthused about the House Republican call for tax increases,” he said in a statement. “I will be interested to see Speaker Bosma and his leadership team make the case for taking more from taxpayer wallets at a time when we carry a huge state budget surplus.”
House Speaker Brian Bosma said he presented the plan to Pence last Wednesday, noting the reaction was “thoughtful” and “polite.”
“I feel very comfortable saying it’s time to invest in our roads and infrastructure,” Bosma said. “I’m anti-tax. I am however pro-growth. And this is an economic growth proposal.”
Following Wednesday’s committee hearing, Representative Dan Forestal (D-Indianapolis), noted the irony of the situation.
“It’s a very interesting dynamic that I’ve not seen yet in my time at the General Assembly,” Forestal said. “The Governor and House Democrats seem to be in agreement that a tax increase is premature.”
Representative Soliday argued that the state’s gas tax has not been adjusted to market rates since 2002, and the proposed increases would be bringing them up to modern levels. He also said Hoosiers are paying less in gas taxes every year as vehicles continue achieving more efficient gas mileage. He hopes to sell Pence on the idea by presenting it as a user fee, rather than a tax increase.
“We think this is not truly a tax increase, certainly not across the board,” Soliday said. “And I think maybe we’ll try a warm hug to start.”
Several other measures contained in HB 1001 were also addressed during public testimony. IU Health Cardiologist, Dr. Julie Clary testified in support of the $1 per pack increase in the cigarette tax.
“There’ve been projections that a one dollar increase would result in 40,000 Hoosiers quitting as a result of the increase in price, which would save nearly 14,000 lives,” Clary said.
The cigarette tax also drew opposition from representatives of the tobacco and retail industries.
“This will create a huge black market that will not only impact border cities such as New Albany, Jeffersonville, Evansville, but it returns to the day of criminals selling cigarettes out of the back of trucks and vans throughout Indiana,” said Bruce Landini, vice president of operations for Circle-K Midwest. Landini said 46-percent of Circle-K convenience store sales come from cigarette sales.
Several mayors expresses support for a portion of the bill that would allow cities with populations over 20,000 to enact their own “wheel tax,” which would be a $25 fee on vehicle registrations. Indiana counties already have the ability to enact such a tax.
HB 1001 would also require the Indiana Department of Transportation to study the idea of turning interstates like I-65 and I-70 into toll roads. The study would include the potential impact on traffic patterns and local economies.
Landini expressed concern about the toll road provision, saying it could encourage some drivers to change their routes away from areas where Circle K stores have been built.
INDOT Chief of Staff, Chris Kiefer said such a study would not commit the state to any action.
Another part of the bill would charge owners of electric cars a $100 annual fee. Soliday said that measure was a matter of fairness since electric car owners don’t pay gas taxes, but still use the roads the taxes pay for.
More testimony and a possible vote are expected next week when HB 1001 goes before the Roads and Transportation Committee again. If it passes, it will then go to the House Ways and Means Committee for further discussion.