INDIANAPOLIS | The state's sinking bottom line could torpedo tax breaks for more than 150,000 Hoosier households that receive subsidized home heating assistance.

Utility bills are subject to Indiana's 7 percent sales tax. But for the past three years, the state has waived the tax on more than $50 million a year in federal grants that help cover the heating bills of low-income Hoosiers.

A measure to make permanent the tax exemption cleared the Democratic-controlled Indiana House last month on an 80-16 vote. But amid tanking state revenues, advocates worry the extension won't survive the Republican-led Senate.

"I know that it's a tight budget year, and they're looking for additional revenue. But this is the wrong place to look," said Kerwin Olson, program director for the Citizens Action Coalition. "As far as we're concerned, by letting this expire, they're raising taxes on the poor. That's the way we look at it."

Olson penned an op-ed piece claiming Republican Gov. Mitch Daniels' administration is opposing the legislation to make permanent the tax break, House Bill 1080. But Daniels on Tuesday dismissed that assertion as a "bad rumor," saying he is not familiar with the legislation.

The measure is before Senate Tax Chairman Brandt Hershman, who said the estimated $14.1 million the tax exemption would cost the state over the next two years must be weighed among other budget priorities.

"I've been very cautious on all bills that have a fiscal impact to the state during these very difficult times," said Hershman, R-Wheatfield. "I don't dispute the cause that it's intended to benefit, but we do have to balance that lost revenue against other needs like state-funded education and health care and other issues."