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House Republicans' road plan includes gas-tax increase, user fees

January 4, 2017
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Indiana House Republicans on Wednesday released their legislative agenda, which includes a tax increase and increased user fees to pay for improving the state’s roads.

Their plan includes raising by 10 cents per gallon—and then indexing to inflation—the state’s gasoline tax, special fuel tax, and motor carrier surcharge tax.

It would also implement a $15 annual infrastructure improvement fee on all vehicles registered in Indiana, and a $150 per-year fee on electric vehicles.

House Speaker Brian Bosma said the plan will cost most Hoosiers about $4 per month, with the goal being to get the investment for roads from “those who utilize and benefit from the asset.”

“Our goal is not to strap the next generation with the cost of building assets today, and that’s what our state has been doing for generations,” Bosma said. “It’s a program that’s responsive, comprehensive, sustainable, and it’s for the next generation.”

Together, new revenue from a 10-cent increase on the three taxes and the new user fees would bring in a combined $386 million per year, according to Rep. Tim Brown, R-Crawfordsville.

About $300 million of that new money would fund state projects, while the remaining funds will be directed to local governments through the Community Crossings Matching Grant Fund.

The gas tax is currently 18 cents per gallon and was last adjusted in 2003. The special fuel tax is 16 cents per gallon and the motor carrier surcharge tax is 11 cents per gallon.

The plan would also transfer the remaining 4.5 cents of the sales tax on gasoline from the general fund to the state highway fund, starting in 2019.

Missing from the proposal is a call to raise the state’s cigarette tax. Bosma said that proposal is likely to come, but will be discussed separately and likely won’t pay for roads.

The Republicans say Indiana needs on average $1.2 billion per year to pay for roads and bridges.

The plan would also require INDOT to study tolling options and submit a waiver to the federal government to allow tolling on existing roads.

Their plan builds off of a road-funding plan enacted by the Legislature in 2016 that provided $335 million in new revenue to INDOT and released about $450 million in local option income taxes that were held in reserve back to local governments to pay for roads.

The 2016 road-funding plan also allowed local governments more flexibility to enact municipal wheel taxes and surtaxes.

Democrats have criticized the plan as a consequence to middle-class Hoosiers from years of tax cuts that have benefited corporations and the wealthy.

“This failed tax policy has painted them into a box, and now we’ve cut taxes over here and we don’t have money to fund our roads,” said state Sen. Karen Tallian, D-Portage. “Now they are coming to ask the regular people of this state for more money for taxes.”

Bosma said that criticism was misplaced and he defended the years of Republican tax cuts as benefiting the middle class.

“We set the right tax atmosphere here for employers,” Bosma said. “That gives success to every Hoosier. It’s better jobs; it’s better wages. We’ve also at the same time significantly cut average- and lower-income Hoosiers’ taxes, especially through the property-tax cap. They’ve gotten their share of the positives on this as well.”

Indiana Gov.-elect Eric Holcomb, who is expected to outline his legislative priorities on Thursday, said he was "encouraged" by the GOP's initial plan.

"I had a great conversation with the Lt. Governor-elect, the Speaker and the President Pro Tempore this morning," Holcomb said in a written statement Wednesday. "I’m very encouraged by where we are all starting on the many important issues we’ll be discussing over the next several months. When it comes to road and bridge funding, we all share the same goalcreating a long-term, sustainable plan that strongly positions us for the future, and I’m confident we’ll have one before we adjourn."

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