Candidate Gregg proposes lifting state’s gas tax

Democratic gubernatorial hopeful John Gregg's first bite of Hoosier populism is likely to run up against some hard economic realism: $540 million is a lot of money to account for.

Gregg rolled out his proposal to eliminate the state's sales tax on gasoline Wednesday, delivering the first detailed policy plan in the governor's race. Standing just down the street from an Indianapolis gas station, Gregg promised the tax cut would save Hoosier drivers between $260 and $520 a year, or $5 to $10 per week.

The money would come from annual performance audits that the Gregg campaign estimates would save the state $650 million a year. He declined to say whether that would mean more budget cuts like those that have come under Gov. Mitch Daniels.

"This is real money going to real Hoosiers," Gregg said Wednesday.

The idea of lifting the 7-percent sales tax on gas is an old chestnut among Indiana Democrats. Former Gov. Frank O'Bannon temporarily suspended the tax in 2000 when gas hit around $2 a gallon. Jill Long Thompson, a 2008 Democratic candidate for governor, called for a ceiling on when the state's sales tax could be levied

The state applies its 7-percent sales tax to the gasoline sales and levies a separate 18-cent-per-gallon charge on gas. The American Petroleum Institute, a Washington-based oil trade group, ranks Indiana's total gas tax burden as sixth highest in the nation.

Republican candidate Mike Pence has talked about cutting the state's corporate and personal income taxes along with the state sales tax, although he has not laid out any specific ideas like Gregg.

"Mike Pence is not opposed to lifting the sales tax on gasoline but he believes that it is no substitute for broad-based tax reform and the kind of energy policies that will reduce prices at the pump for Hoosiers and lessen our dependence on foreign oil," Pence spokesman Matt Lloyd said in a statement Wednesday.

The lack of details or explanation of how proposals would be paid for has become a subtext to the governor's race, something Gregg alluded to in his comments.

"We're going to tell you how it's going to be paid," Gregg said with a subtle jab at Pence. "There's a novel idea."

Gregg also got in a dig on Daniels, by highlighting one of his most embarrassing problems: the $526 million in tax errors that have been discovered in the last four months.

But beyond the political jabs, Gregg faces a few serious problems. The first is the math of Daniels' $526-million blunder.

When taken together, the state's $320-million and $206-million errors make up a $526-million mistake. But the $320 million is money the state didn't know it had, while the $206 million is money it didn't know it owed.

The net effect is only $114 million more in one-time money for the state, much of which was already gobbled up by lawmakers this year to pay for full-day kindergarten and additional money for victims of the state fair stage collapse.

Gregg also faces another challenge in paying for his plan. After eight years of budget cuts from the Daniels administration, he could have trouble finding additional money sitting about in the state budget, said John Ketzenberger, president of the Indiana Fiscal Policy Institute.

"Whether you can find the $640 million suggested from the performance audits is another question," he said. "That's' going to take a big couch to find that much loose change in the state budget."