Gas, cigarette tax hikes on table again as lawmakers weigh road-funding options

Road funding will again be a key issue for state lawmakers as they gear up for the budget-writing session of the Indiana General Assembly.

House Speaker Brian Bosma said Monday at the Indiana Chamber of Commerce’s annual legislative preview event that he wanted funding for Indiana’s roads and bridges that would last for “a generation”—and the question now is whether the Legislature will support raised taxes to pay for it.

Senate Pro Tem David Long, R-Fort Wayne said it “is inevitable that we have to find some new sources of funding, no question about it.”

Transportation funding became a key legislative issue last year as motorists and lawmakers lamented Indiana’s road quality, but some, including Long, said they preferred waiting until the 2017 budget-writing session to make major changes.

The Legislature ended up in 2016 passing a $1 billion stop-gap proposal that didn’t raise taxes. It used some of Indiana’s fiscal reserves, redirected some of the state’s sales tax on gasoline to pay for roads, and gave income tax reserves back to local governments to spend on their own projects.

Long said it would be “logical” to index the gas tax to make it keep up with inflation. And lawmakers said they would again consider a cigarette tax—an idea that passed muster with the House Republican caucus last year.

The cigarette tax would have increased by $1 per pack under the House Republican’s proposal last year. They also supported raising the gas tax.

“We may see it again,” Bosma said on the cigarette tax, pointing out that the state could also see more freed up dollars to spend on transportation if fewer people smoked and brought down smoking-related Medicaid expenses.

It’s unclear whether the State Senate would approve such a proposal.

“We aren’t really excited about it in the Senate Republican caucus, but we have to look at all ways to finance transportation,” Long said.

The Indiana Chamber has said it would support indexing or increasing the gas tax, charging fees for alternative-fuel vehicles, tolling an interstate, or dedicating more of the sales tax on fuel to road funding.

A Legislative study committee was also tasked this year with coming up with recommendations on road funding.

House Democratic Minority Leader Scott Pelath said he will be looking to Gov.-elect Eric Holcomb’s “solutions and recommendations” on transportation because he believes the “chief executive has the primary role in making that case to the people,” particularly if it involves a tax increase.

“I’m absolutely certain that every motorist, every citizen wants to see upgrades and not just general improvements, but specific new thoroughfares,” Pelath said. “We have to start building things.”