State Considers Hike In Gas Tax

By Scott Sarvay
By Max Resnik

March 8, 2011 Updated Mar 8, 2011 at 7:24 PM EDT

INDIANA (Indiana’s NewsCenter) - The State of Indiana is considering increasing the gas tax, which could cause more pain at the pump.

Currently, Hoosiers pay $0.18/gallon in the gas tax. With gas prices adding stress for many Hoosiers, there is some wonder as to what the state has to gain with an increase in the gas tax.

According to Hedayeh Samavati, Ph.D. and Professor of Economics at IPFW, this is the last ditch effort to incur tax revenues for the state. Property taxes have been capped and the income tax won't be raised. Folks just aren't making a ton of money in this economy. The income tax revenues go hand-in-hand with the sales tax. If Hoosiers aren't spending money, there can be no growth in revenues in the sales tax.

Samavati says, "Gas tax would be a stable and a sure sort of source of funds for the state even though it's not a good thing. It would be very painful, however that would provide the government with revenues."

The state could use any revenues gained to take car of any infrastructure issues, including road, highway and bridge maintenance.

But why tax gas?

Everyone needs gas to get to their destination. The country still has yet to produce a substantial substitute or competitor for gasoline. The legislature understands the demand and can hope to increase revenues through a tax.

Samavati adds, "Once you have to drive to work, once you have to drive to school, you have to get from point A to B, then you are forced to pay those taxes in the time government has a deficit, maybe that's the last resort."

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