Indiana’s gas tax increases fuel costs

INDIANAPOLIS — Indiana residents will feel the pain at the gas pump even more as gas taxes rise again.

The Indiana Department of Treasury recently released its July gasoline excise tax calculation. The calculation shows that the rate will be 29.1 cents per gallon starting July 1, up from 24 cents in June.

The department calculates the gasoline excise tax by taking the average retail price per gallon of gasoline for the previous month and multiplying it by the state retail tax of 0.07 cents. The state said the average retail cost was $4.1586.

In addition to the gasoline tax, individuals who purchase gasoline pay additional state and federal taxes. In June they paid a gas use tax of 32 cents per gallon used for infrastructure projects and a federal tax of about 18 cents per gallon.

People buying gasoline in Indiana will also see an increase in the state consumption tax in July. The tax will increase from 32 cents to 33 cents due to an annual increase under Indiana law

If the average retail cost of gasoline stays at $4.1586 in July, people would end up paying about $4.96 at the pump. However, GasBuddy reports that the average cost of gas in Indiana as of June 20 is approximately $5.13.

The excise tax on gasoline has been rising steadily since hitting its lowest level on record in June 2020. In May, the tax surpassed the previous record of 22.9 cents set in July 2014.

Indiana Democrats have long called for the suspension of the Indiana gas use tax and gasoline use tax. However, Governor Eric Holcomb argued that he had no authority to suspend the state’s gas tax.

“In order for an Indiana governor to suspend gas taxes by declaring an energy emergency, the state must have an existing or projected energy shortage that would endanger life, health and property,” Holcomb said in a statement. “We haven’t reached that threshold.”

Republican Legislative leaders argued that much of the gas tax money was going toward the state’s highway construction program and instead pushed through a plan to gradually lower Indiana’s personal income tax rate over the next seven years.

Instead of suspending the gas excise tax, Gov. Holcomb announced a plan to return $1 billion from state reserves to Indiana taxpayers. The governor said the $225 payment would help them deal with high gas prices and inflation.

The White House is examining the issue of high federal gas prices and exploring options for relief. The Washington Post reports that senior advisers are taking a second look at some previously rejected ideas, including providing Americans with gas cards.

On Monday, President Joe Biden said he was considering a state gas holiday for the gasoline tax. This would take about 18 cents per gallon at the pump.

Economists say it’s unclear how the gas tax suspension could affect Hoosiers.

Jackson Dorsey, an assistant professor of business administration and public policy at the IU Kelley School of Business, points out that previous studies have shown that all of the tax cut may not return to your wallet.

“It might lower prices a bit, but producers might also respond by raising prices,” Dorsey explained.

White House members meet with CEOs of major oil companies to discuss rising oil prices.