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Indiana gas tax burden dips for September, still third-highest in state history

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Indiana gas tax burden dips for September, still third-highest in state history

Jayme Wampler, right, watches former Vice President Mike Pence pump gas into her vehicle Aug. 2, 2022, at Luke Convenience Store & Gas Station in Hobart.

Hoosiers will pay 75.4 cents in taxes, including 57 cents in state taxes, for every gallon of gasoline they purchase in September.

The Indiana Department of Revenue this week announced the applied 7% sales tax on gasoline purchases will be 24 cents per gallon next month, down from 29.4 cents per gallon in August, due to the falling wholesale price of gasoline in Indiana and across the country.

The declining price of fuel has no impact on Indiana's 33 cents per gallon gasoline tax, which state lawmakers this month opted not reduce to its pre-July 1 rate of 32 cents per gallon, or the 18.4 cents per gallon federal gasoline tax that's not changed since 1993.

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As a result, Hoosier motorists next month will be paying the third-highest tax burden on gasoline purchases in state history — an amount exceeded only by July and August.

The Republican-controlled General Assembly did agree Aug. 5 in Senate Enrolled Act 2 to cap the applied sales tax rate on gasoline at 29.5 cents per gallon, a level it never has reached and likely never will unless gas prices soar to new record highs.

Indiana is one of just 16 states, including Illinois and Michigan, where gasoline purchases even are subject to sales tax. The majority of the country opts not to double-tax gasoline purchases by collecting both a gasoline tax and its sales tax on gasoline.

Statehouse Democrats attempted several times during the recently completed special legislative session to temporarily suspend the collection of Indiana's gasoline taxes and make up the lost revenue earmarked for road construction projects by using a portion of the $6.1 billion in the state's reserve accounts.

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That policy, if enacted, would have immediately reduced the price at the pump by 57 cents per gallon on Sept. 1.

However, Republican leaders, including Gov. Eric Holcomb, instead decided to use $1 billion from the state's budget reserves to pay eligible Hoosiers a $200 taxpayer rebate to cope with the inflation affecting all their purchases, not just gasoline.

They said it didn't make sense only to focus on gasoline taxes since approximately one-fifth of the gasoline sold in Indiana is purchased by non-Indiana residents, and there's no reason to give them a tax break.

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