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Indiana's record-breaking gasoline taxes heading even higher in August

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Hoosier motorists will continue feeling some extra pain at the pump even if gasoline prices keep incrementally falling as they have for more than 30 days in a row.

Blame Indiana's record-high fuel taxes.

The Department of Revenue announced Monday that the applied 7% sales tax on all Indiana gasoline purchases in August will be 29.4 cents per gallon — the highest in state history.

The increase, from a record 29.1 cents per gallon in July, is based on the statewide average pre-tax price for gasoline ($4.1934 per gallon) during the June 16-July 15 tracking period.

Indiana is one of just 16 states, including Illinois and Michigan, where gasoline purchases 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.

The gasoline tax in Indiana now stands at 33 cents per gallon, up from 32 cents per gallon in June and 18 cents per gallon in 2017, in accordance with a state law enacted by the Republican-controlled General Assembly and Republican Gov. Eric Holcomb to generate more revenue for road construction projects.

As a result, the gas prices Hoosiers pay in August will consist of 80.8 cents per gallon in taxes, including the state sales tax on gasoline, the state gasoline tax and the 18.4 cents per gallon federal gas tax.

Records show wholesale gasoline prices have fallen from a peak of $4.31 per gallon June 8 to approximately $3.25 per gallon Monday.

But the wholesale price likely will need to drop another 8-10% to under $3 per gallon to bring prices at most Northwest Indiana gas stations below $4 per gallon after adding in taxes and profit.

However, even if the wholesale price drops further to $2.50 per gallon, the price at the pump in Indiana still will be boosted by a minimum of 80.8 cents per gallon for taxes — at least until the applied sales tax rate is adjusted again for September.

Statehouse Democrats are hoping to change this during the special legislative session that begins July 25.

They plan to propose temporarily suspending Indiana's 62.4 cents per gallon in gasoline taxes for several months, and replacing the lost revenue with excess budget reserves, to immediately bring down the price Hoosiers pay at the pump.

Republicans have a different idea. They want to send checks worth $225 to eligible Hoosier taxpayers to help defray the impact of inflation on all consumer goods, not just gasoline.

State Sen. Rodney Pol, D-Chesterton, said that while he agrees a state check will aid many Hoosiers, suspending the state's record-high gasoline taxes will more quickly help Indiana motorists and businesses save money every time they fill up their vehicles.

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"Many small businesses, trucking companies and nonprofits like Meals on Wheels won’t directly benefit from these rebate checks and are getting hit hard by skyrocketing gas prices," Pol said.

"Additionally, I share the concerns of many Hoosier economists about the increase in inflation that is projected following the direct rebates. We must stop being so reactionary to these economic issues and instead proactively invest in our future," he added.

Across the state line, Illinois' gasoline tax currently is 39.2 cents per gallon and the state sales tax on gasoline is 55.9 cents per gallon for the July 1-Dec. 31, 2022, period.

Cook County, Illinois, then adds its own 6 cents per gallon gasoline tax and an additional 1.75% sales tax. Gasoline purchased in Chicago includes all the state and Cook County taxes, plus a city gasoline tax of 8 cents per gallon and the city's 1.25% sales tax.

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