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Proposed Travel Taxes Increase Transportation Costs for Hoosiers

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State Republicans are kicking off Eric Holcomb’s first term as Governor with a new road funding plan that would mean higher transportation costs for most Hoosiers. The bill, authored by Representative Ed Soliday of Valparaiso, would raise $1.2 billion per year by increasing gasoline taxes and vehicle registration fees. It would also require the state to seek approval from the federal government to place tolls on existing interstate highways that cross the state.

Statehouse Republicans say the tax increases, which would raise vehicle registration costs by $15 and gasoline prices by 10 cents, are necessary to maintain the roads. But many of those same Republicans voted for tax cuts that created the revenue shortfall in the first place.

The Pence administration signed off on hundreds of millions of dollars in tax cuts per year, mostly in the form of reduced income taxes for corporations and wealthy individuals, as well as repealing Indiana’s inheritance tax. The Pence tax cuts add up to almost half the money the new bill seeks to raise, depending on estimates.

Representative Dan Forrestal of Indianapolis, the ranking Democrat on the transportation committee, commented his take on the policy: “The House Republicans are rapidly becoming a caucus of out-of-touch and arrogant. If there’s one lesson that can be taken away from this previous election, it’s that voters are frustrated with the status-quo of ‘business as usual.’ Instead, those in the supermajority have decided that is a mandate to do whatever they want. This plan to continue cutting taxes for large corporations, not mom-and-pop shops, that need this tax relief the least – they are going to continue raising taxes on Hoosiers just trying to get by.”

The proposed tax increase also includes a $150 registration fee for electric vehicles. Representative Peggy Mayfield of Martinsville, a Republican, says this is intended as a substitute for lost gas tax revenue, and is not a penalty against electric car owners: “Electric cars will face a fee of $150 a year. That’s not a fee or penalty for efficient or alternative fuels; it’s because they don’t pay any gas tax. They still use the roads and damage the roads just like any other car. So that is the average that those with electric vehicals will have to pay.”

Democrats in the Statehouse say raising gas taxes is a regressive move that will hit low- and middle-income Hoosiers the hardest. Low income Americans spend a larger share of their income on gasoline and other transportation expenditures, and don’t benefit from cuts in corporate or inheritance taxes. Under the new plan, the gas tax would increase from 18 cents per gallon to 28 cents, with a corresponding increase for diesel fuel.

Representative Mayfield says the benefits of tax cuts would make up for it: “I know that argument has been thrown out, but I have two different viewpoints on that. One is that those tax cuts bring in business and make people stay here. They make Indiana very attractive and building that economy benefits everyone. At the same time, that road funding – those who use the asset will pay proportionally – including those who are not Hoosiers that drive through our state. They damage our roads too. They fill up in our state and use that motorcarrier surcharge in our state because those trucks are using our roads. They have to pay their share.”

The funding bill also opens the door to imposing tolls on existing interstate highways. While Republicans have been mute on exactly which interstates would be targeted for tolling, likely candidates include I-70, I-65, and I-69. Tolls were proposed during the Daniels administration for I-69 between Bloomington and Indianapolis, but the proposal was eventually dropped amid intense public outcry. When asked about the possibility of tolling I-69, Mayfield said only that all options were on the table, and that any action on tolls was likely to be several years in the future.

Dan Forestal isn’t buying it, and says Republicans’ tolling plans are off the reservation: “They are looking at I-69 and I-70, as I understand it. Some of the ideas that they have had are ‘kooky.’ Putting transponders in peoples’ cars, I think they have gotten a little out of touch. Being in the supermajority, they have gotten out of touch with their voters. I don’t think they are listening to people when they say they want to put a transponder in your car and toll the highway you take everyday to work.”

The proposed tax increase has not yet passed out of the transportation committee, but is scheduled for a first hearing later this month.

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