INDIANAPOLIS (AP) — Indiana sales taxes on gasoline would be capped if prices at the pump exceeded $2.75 per gallon under a proposal by Democratic candidate for governor Jill Long Thompson.

"That would be a benefit to families who are facing difficult economic times," the former Indiana congresswoman said Tuesday. It was the same day Indiana's sales tax increased from 6 percent to 7 percent to help pay for a property tax relief and restructuring plan approved last month by the General Assembly.

According to AAA's Daily Fuel Gauge, the average price per gallon of regular unleaded in Indiana on Tuesday was $3.25. Nineteen cents of that is in state sales tax, which is separate from an 18-cent state excise tax and an $18.4-cent federal excise tax charged on every gallon sold.

At Tuesday's prices for regular unleaded, motorists would save about 3.3 cents per gallon in sales taxes that would not be applied above Long Thompson's proposed cap. On a 15-gallon fill-up, the savings would be about 50 cents.

Long Thompson said she would be open to seeking a lower cap through legislation, but nothing higher than a $2.75 threshold. She said that based on current prices and her proposed cap, motorists would save about $100 million collectively per year.

She said her proposal was based on legislation that passed the Democrat-controlled House in 2007 that would apply the state's sales tax up to a total pump price of $2.25. If prices were higher than that, motorists would not have to pay sales tax on the difference between the higher price and $2.25.

The bill failed to pass the Republican-controlled Senate.

House Democrats had campaigned on a proposal during the 2006 election season to eliminate the sales tax on gasoline completely. But they abandoned it during the 2007 session after they had regained control of the chamber, saying it would cost the state too much in lost tax revenue given a less-than-rosy fiscal forecast.

The original proposal would have cost the state between $328 million to $362 million in annual lost revenue, according to estimates based on various pump-price forecasts cited at the time by the Legislative Services Agency.

Long Thompson's primary opponent, Indianapolis architect Jim Schellinger, said he agreed that the price of gasoline was out of control.

But, he said, "Instead of merely addressing the issue of the sales tax on gasoline, we need to address the overall issues of rising fuel costs and what we can do to lower that burden on Hoosier working families and businesses."

Jane Jankowski, a spokeswoman for Republican Gov. Mitch Daniels, said that seeking a change in the law to provide a cap on gasoline sales taxes at a certain price level was an interesting idea and a possibility the governor has thought about. Daniels has no primary opponent.

Although Long Thompson's proposal would require legislative approval, she said if elected she would use a current state law to declare an energy emergency and suspend the sales tax on gasoline for 60 to 120 days. Former Gov. Frank O'Bannon, a Democrat, suspended the tax in July 2000 when gasoline prices hit about $1.88, which was considered expensive then.

Republicans claimed it was an election-year ploy, but O'Bannon said it was needed to help working families and Indiana businesses. O'Bannon extended the initial 60-day suspension into September, then lifted it.

In 2006 and 2007, Daniels repeatedly rejected requests to suspend the sales tax on gasoline, including in May 2007 when regular unleaded hit an average record high of $3.49 per gallon. He said it would not be an effective or responsible thing to do, in part because he was still trying to restore the fiscal strength of state government.

He ultimately sought an opinion from the attorney general's office on whether the law O'Bannon used to suspend the tax allowed a governor to do so. The office issued a nonbinding letter of interpretation that said it was clear that that law did not include the power to suspend sales taxes.