When Indiana motorists go to the gas pump, they feel the squeeze.
Hoosiers pay the fourth-highest gasoline tax in the nation, in part because you pay three different taxes every time you fill up.
The federal government takes 18.4 cents per gallon, and Indiana levies a 34 cents per gallon excise tax. But on top of that, a 7% sales tax is also levied. With gasoline prices exceeding $2/gallon before taxes, that number often hovers between 15-20 cents per gallon.
According to the Tax Foundation, Indiana’s average state gas tax on July 1 was 54.4 cents per gallon – 72.8 cents once Uncle Sam’s cut is factored in.
The government makes a significant amount more profit per gallon of gasoline than any oil company ever will, but you – the motorist and taxpayer – get stuck with the bill.
Only taxpayers in California, Illinois and Pennsylvania pay more in gasoline taxes.
To make things worse, not only is Indiana one of six states that levy a sales tax on gasoline purchase above the per-gallon excise tax, the state legislature increases the per-gallon tax by a penny every July 1.
The automatic increase was set to expire in 2024, but the General Assembly quietly extended the annual increase through 2027, when it will be 38 cents per gallon. It will likely attempt to do so again when the legislature thinks we’re not paying attention.
As the General Assembly meets for the 2024 legislative session, the Libertarian Party of Indiana is urging the legislature to suspend one of the two taxes – either the excise tax earmarked for infrastructure projects, or the sales tax that adds a couple of dollars to the price of every fill-up.
The additional tax on top of the original tax is akin to double-taxation for the same product. And while our state’s leaders and elected officials brag about Indiana’s low-tax climate, it is largely limited to low income taxes. Taxes are not reduced, they are simply shifted, which is the antithesis of a General Assembly that claims to be in favor of low taxes and limited government, while raising taxes and increasing the state government’s size and scope.
The sales tax is also regressive, hitting hardest those with the lowest incomes, as they will spend a larger portion of their paychecks on gasoline purchases. It also encourages people living in border counties – especially near Kentucky (whose gas tax is 24 cents per gallon lower) or Ohio (whose tax is 16 cents per gallon lower) to go out of state, denying Indiana any of the tax revenue it claims to need.
Hoosiers have to tighten their belts and live within their means. It’s time for government to do the same, and repeal the state sales tax on gasoline and the automatic increase in the excise tax.
Evan McMahon, Chair
Libertarian Party of Indiana