Indiana road funding proposal relies on new, existing taxes

By Keith Goble, Land Line state legislative editor | Thursday, January 22, 2015

Indiana state lawmakers are expected to spend the next three months working on plans to boost funding for roads and bridges throughout the state. One of the first bills addressing the issue to be introduced during the session that began in mid-January would rely on a mix of new and existing taxes.

State law limits to 1 percent the amount of sales tax on fuel purchases that is routed to the state’s motor vehicle highway account. The account claims about $76.4 million a year from the tax collection for state and local roads.

The account received $726.8 million in fiscal year 2014, according to the legislative services agency.

Rep. Timothy Wesco, R-Osceola, has offered a bill that would increase the amount of sales tax collected on gas and diesel that is applied to roads by about $75 million annually to about $150 million per year. Specifically, HB1227 would double the amount applied to roads from 1 percent to 2 percent. In return, the state General Fund would take the loss.

The push for more money to be applied to roads and bridges comes as state lawmakers have been unable to come up with funding sources as Indiana’s “Major Moves” initiative comes to an end. State officials have said that something must be done because money remaining from then-Gov. Mitch Daniels’ $3.85 billion lease of the Indiana Toll Road is mostly spent or due to be spent for specific projects.

As a result, Indiana must again rely mainly on the state’s 18-cent-per-gallon gas tax and 16-cent-per-gallon diesel tax to get needed transportation work done.

To make matters worse, state officials point out that more fuel efficient vehicles and changing driving habits combined with increased costs of building roads continues to widen the funding gap.

A “blue ribbon” panel created by Gov. Mike Pence was responsible for coming up with solutions to reverse course on transportation funding. The 23-member, statewide panel made up of public and private officials unveiled its recommendations during the fall to upgrade the state’s roads and bridges. Among the options touted is indexing the state’s fuel tax to increase with inflation.

Another component of Wesco’s bill would help shrink the funding gap by indexing the gas and diesel tax rates for inflation beginning in 2018.

The fuel tax indexing is expected to raise revenue by $14 million each year.

A separate bill of note would raise revenue to help repair travel plazas along the Indiana Toll Road.

Rep. Tom Dermody, R-LaPorte, introduced a bill to authorize the counties of Elkhart, LaGrange, LaPorte, Porter and Steuben to adopt a food and beverage tax. Specifically, HB1543 could result in the attachment of a 1 percent tax on all food and beverage sales at the roadway’s 10 travel plazas.

According to state estimates, the tax could raise up to $180,000 annually to assist in facility upkeep.

Dermody’s bill and Wesco’s bill await consideration in the House Ways and Means Committee.

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