Gas sales tax emerges as political issue again

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By Tiffany Griffin

INDIANAPOLIS (AP) — The sales tax on gasoline has been a political football in Indiana since the late Gov. Frank O'Bannon temporarily suspended the tax during his 2000 run for re-election.

Democrat Jill Long Thompson is the latest person to kick the ball, offering a proposal to cap the sales tax if prices at the pump exceed $2.75.

Her plan might not save motorists much, and it's unclear whether she'll get much mileage out of it in her run for governor. But the issue could last beyond the May 6 primary — even if she loses the nomination to Indianapolis architect Jim Schellinger.

Schellinger says Long Thompson's plan lacks depth.

"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," he said.

But a spokeswoman for Republican Gov. Mitch Daniels says he thinks it's an intriguing idea and one he might consider pursuing if re-elected.

With prices again well above $3 per gallon, it's a water-cooler topic. It's common to hear people complain to themselves as they fill up their vehicles, or to the cashier as they pony up.

Long Thompson announced her proposal on April 1, the day that the state sales tax increased from 6 percent to 7 percent. The extra revenue will help pay for property tax relief under a plan lawmakers passed last month.

Under her plan, the state's sales tax on gas would not apply after the total pump price reaches $2.75. On the day she announced it, the average price for a gallon of regular unleaded in Indiana was $3.25, according to the AAA Daily Fuel Price Gauge.

At that price, Long Thompson's proposal would save motorists about 3 cents per gallon. With a 15-gallon fill-up, the savings would be about 50 cents. If the price rises to $3.50 per gallon, the savings would be about 5 cents per gallon, and 73 cents on a 15-gallon fill-up.

Long Thompson said she would be open to considering a lower threshold.

"I'm very flexible on it, but we need something to help Hoosier families," she said.

If the price was $3.25, she said her proposal would save motorists $100 million per year. She said it might not cost the state lost tax revenue because people likely would spend their savings on other items.

Long Thompson said her plan was modeled after a House Democrat bill in 2007 that would have capped sales taxes at anything above $2.25 per gallon. It passed the House last year but went nowhere in the Republican-ruled Senate.

House Democrats ran on a campaign proposal in 2006 to eliminate the tax completely, but abandoned that plan last year because they said it would cost the state too much when the fiscal forecast was less than rosy.

House Speaker Patrick Bauer, D-South Bend, said House Democrats will push for a gas tax cap again next session. When told that Long Thompson's proposal was based on the House Democrat legislation in 2007, he said, "Emulation of greatness is no mistake."

Long Thompson's plan would need legislative approval, but she said if elected she would do what O'Bannon did by declaring an energy emergency and temporarily suspending the tax for up to 120 days.

O'Bannon temporarily suspended the tax in July 2000, when prices hit $1.80 per gallon. It was a big jump then, and although Republicans called it an election-year ploy, O'Bannon said it was needed to help Hoosiers financially and keep businesses competitive.

He was showered with local and national media attention when he made the move, and he milked it for weeks.

In 2006 and 2007, Daniels repeatedly fended off requests — including ones from Bauer and Long Thompson — to temporarily suspend the tax. He said it wouldn't save motorists much and would take a hit on a balanced but lean budget.

He ultimately sought an opinion from the attorney general's office on whether the law O'Bannon cited in suspending the tax gave a governor the authority to do so. The office issued a nonbinding interpretation saying the law did not.

That obviously has not ended the political saga over the sales tax on gas.

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