Fuel Tax

Hoosiers will pay an extra penny per gallon at the pump July 1 as Indiana's gasoline tax increases to 29 cents per gallon, up from 28 cents.

INDIANAPOLIS — Indiana motorists are about to see a 1 cent-per-gallon increase to their gasoline costs in a planned state push for more road infrastructure funding.

Starting July 1, the Indiana gasoline tax increases to 29 cents per gallon, up from 28 cents. As recently as June 30, 2017, the rate was 18 cents per gallon, according to the Indiana Department of Revenue.

This marks the beginning of the annual gas tax hikes mandated by an infrastructure funding package, approved last year by the Republican-controlled General Assembly and Republican Gov. Eric Holcomb. The move aims to raise more than $1 billion annually to construct and maintain state and local roads and bridges, many of them in need of urgent repair or replacement, throughout Indiana.

House Enrolled Act 1002 directs the gas tax rate be adjusted for inflation, to a maximum of one cent per gallon, every year through 2024, following an initial 10 cent hike in 2017.

That law, sponsored by state Rep. Ed Soliday, R-Valparaiso, also boosted vehicle registration fees, with extra charges for hybrid and electric vehicle owners who generally purchase less gasoline, and opened the door to tolling Indiana's interstate highways.

Soliday said the gas tax increases are meant to ensure the state's infrastructure purchasing power remains consistent by regularly adjusting the rate for inflation, which was not done between 2003 and 2017. 

In refuting critics of the increase, Soliday also noted that a one-cent tax hike is minimal compared to recent increases in the retail price of gasoline that directly benefit oil-exporting nations.

"I'm a little confused where the crisis is here," Soliday said. "We've been able to contribute a dollar a gallon more to roads in Russia and Saudi Arabia, but we don't want to contribute a penny more just to keep the buying power the same for state road construction?"

At 29 cents per gallon, Indiana's gas tax on July 1 will be 10 cents per gallon more than the rate charged in neighboring Illinois.

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Hoosiers also will be paying just one cent per gallon less than the gas tax charged in Chicago after city and Cook County fuel taxes are included.

In addition, Indiana and Illinois are among seven states that charge sales tax on gasoline purchases. The 7 percent Indiana sales tax rate this month adds 15.9 cents to the per gallon price at the pump.

Drivers who purchase diesel or other alternative fuels will pay higher taxes too.

Starting July 1, the state's "special fuel" tax rate for most non-gasoline fuels increases to 48 cents per gallon, up from 29 cents.

Soliday explained that the 19 cents per gallon hike follows the Legislature eliminating Indiana's hard-to-collect motor carrier surcharge in this year's House Enrolled Act 1290.

The state instead is getting that revenue from trucking companies through a higher special fuel tax, which mostly is paid by truckers.

At the same time, the state's sales tax on special fuel has been eliminated. So diesel car or pick-up truck owners "are going to break even, or just about" on the rate change, while most trucking companies were exempt from special fuel sales tax anyway, Soliday said.

Going forward, the new 48 cents per gallon special fuel tax will be adjusted by up to 2 cents a year in each of the next five years to account for inflation.

Indiana Democratic Party Chairman John Zody condemned the tax increases. He said Statehouse Republicans are to blame for repeatedly kicking the can down the road on infrastructure funding over the past decade.

"Hoosier motorists are paying at the pump for that negligence," Zody said. "Gas prices in Indiana are the fastest rising in the nation and now Indiana Republicans are just piling on with another tax hike."

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