House Minority leader Pat Bauer has proposed a repeal of the gas tax sales tax on gas in light of high gas prices. I can’t agree with him on this one, but a modification might be appropriate. The current tax is 6 cents on the dollar.
Bauer said rising gasoline prices since Republican Gov. Mitch Daniels took office in January 2005 have generated $152 million more in gas sales taxes through July than the state would have gotten had prices remained the same. Bauer, D-South Bend, said gasoline was an essential commodity and Indiana should not be profiting from what he called price gouging by the oil industry.
“People are hurting, the middle class and poor people need relief to get to work,” Bauer said. “We don’t need to take partnership in this gouging.”
Unlike privatizing the toll road, I think gas taxes are an appropriate method of funding road construction and maintenance. Letting oil companies squeeze the State out of this method of funding roads would be bad policy. However, it would seem reasonable to set the tax at some number of cents per gallon rather than cents per dollar. I think there is going to be a correlation between gallons consumed, miles driven, and road construction and maintenance needed. I suspect the correlation between gallons consumed and necessary road maintenance is going to be closer than that between dollars spent and necessary road maintenance. Price of gasoline is going to be more variable than fuel economy.
So the legislature would probably be well advised to convert the tax from $0.06 per dollar to $0.0X per gallon where “X” reflects the average impact of the use of a gallon of gas on our roads.
Update This is something of a “nevermind” moment. As has been pointed out in the comments, Bauer’s remarks were directed at the sales tax on gas which is the standard 6% and were not directed at the excise tax which is, per the article if I’d bothered to read closely, 18 cents per gallon for the state and 18.4 cents per gallon for the federal government.
“the middle class and poor people need relief to get to work”
Some cities refer to that as “mass transit.”
I know, I know, not everyone lives in a city, but it saddens me to read about the Interurban that *used* to run around Indiana. I myself don’t drive (bad eyesight) – such a system in today’s world would be AWESOME! Someone on AOL has put together a great list of where the lines ran: http://hometown.aol.com/metrafan/interin.html
I would favor increasing the gas tax to discourage use of a diminishing resource and encourage development of alternative energy sources. I oppose automatically putting all of the funds generated into road construction though.
A Democrat wants to cut taxes? Must be an election year. Bauer may as well have hung his hat on repealing DST – that might have resonated better with the voters.
Doug – Bauer is talking about the sales tax that is 6% for everthing we buy except food. The gasoline tax is so much per gallon. Think beer. You pay a sales tax on the beer plus a alcohol beverage tax.
What Bauer should request is that the tax both federal and state be eliminated on gasoline purchased at toll road service stations because the roads are supported by the tolls and not by the fuel tax. Mitch would love him for it. We are talking almost 50 cents a gallon
I agree with you, the gas tax is a more honest tax, especially when restricted to transportation funding. I would rather see a slightly higher gas tax and elimination of tolls. Toll roads are inefficient, requiring an army to collect the tolls, having incomplete interchanges in some areas because God forbid someone might get a couple free miles. The cost of the installation of the I pass in Ilinois probably approached or exceeded the cost of building the roads in 1958. this means a lot of bonds could have been retired.
And of course there’s Blagojevich’s $500,000 “campaign” signs announcing open tolling. Mitch missed on that one.
Just to clarify, the SALES TAX on gas is different from the gas tax. The SALES TAX on gas is, as I understand it, simply general state revenue. It is NOT used for road improvements.
My mistake. I just wasn’t reading closely or thinking clearly when I posted this. The linked article spells it out pretty clearly that Bauer was referring to the sales tax on gas as opposed to the excise tax (which I referred to as a “gas tax”.) I updated the post to reflect my mistake.
Posting before coffee is always risky :-) I, myself, try never to do anything of any importance until after a couple of cups.
If repealing the gas tax means that the southern section of I-69 doesn’t get built for lack of funds, then I’m all for it. Otherwise, it’s needless election year pandering. Given that the rate of gas consumption has increased steadily even with the latest price hikes, I don’t see that repealing the tax would help all that much.
Is it possible to do anything of importance before having had two cups of coffee?
So its sales tax on gas, not gas tax. This has already been done elsewhere. Back when I still lived in Coal City, Illinois around 1999 or 2000, gas spiked from about $1.09 to about $1.60 and many panicked. Then Governor (and now convict awaiting sentence)George Ryan, suspended the sales tax on gas for a few months. It had the effect on gas prices of shooting a BB gun at Godzilla. But it seems like ever since that time the State of Illinois (which was fiscally sound then) has been on the edge of being broke. However, Ryan was right when he said the spike in prices brings a windfall to the State.
Sue, you are correct, sales tax usually goes to the General Revenue fund, some of it I believe may end up passed on to municipalities. This extra revenue should help the ststes funding, yet we seem to need to sell our infrastructure, like Toll Roads and lotteries anyway.