Governor says Indiana may have ‘flexibility’ to extend gas tax suspension again

Hoosier motorists could continue getting a break on state gas taxes beyond early June after Gov. Mike Braun said Friday that he could have the authority to extend his tax suspension under Indiana’s energy emergency law.

Braun said that he plans to revisit an extension in the days before the current suspension is scheduled to end June 7.

“I’ll be looking at that,” Braun said during a news conference. “It does, yes, look like there might be flexibility to continue it.”

Braun first suspended the state’s gasoline use tax — effectively the state 7% sales tax collected on gasoline — through an April 8 executive order tied to rising fuel prices. He later expanded the relief through a second executive order issued May 6 that also suspended Indiana’s 36-cents-a-gallon gasoline excise tax.

Together, the two suspensions currently total roughly 59 cents per gallon in state taxes

“I don’t think I’ve ever seen in my career where a state’s gone — foregone both a use tax or sales tax and the excise tax itself,” Patrick De Haan, head of petroleum analysis for GasBuddy, told the Indiana Capital Chronicle.

A notice from the Indiana Department of Revenue this week showed that the gasoline use tax rate for June would otherwise rise to 26.5 cents per gallon, up from 23.3 cents in May.

Indiana’s average gasoline price Friday was $4.005 per gallon, compared to the national average of $4.552, according to AAA’s tracking. The state average was $2.68 in late February before President Donald Trump launched the war with Iran that prompted a worldwide spike in oil prices.

Braun said Friday that he expects to make a decision shortly before the current suspension expires.

“We’ll be in good shape here,” the governor said. “So, I’ll be looking at that again that week before it’s due to expire.”

Can Braun extend the tax suspension?

Braun said that extending the suspension would continue reducing revenue dedicated largely to road and bridge projects.

“When that bill was done in ’17, we knew it was going to flatten and then start to wane, and we’ve got that right in front of us,” Braun said, referring to Indiana’s 2017 infrastructure funding law. “We got more interstates per square mile of state than any other place in the country.”

Legislative leaders noncommittal on Indiana gas tax suspension action

He added that inflation has “rested heavily on concrete and steel” and said he wanted to weigh infrastructure funding needs against continued tax relief for motorists.

Less clear, however, is whether Braun can legally continue extending the emergency declarations without legislative approval.

Indiana law allows a governor to declare a state of energy emergency for up to 60 days. The statute also says a governor “may not renew or extend a proclamation more than once without approval of the general assembly.”

Braun initially declared an energy emergency April 8 alongside the first gasoline use tax suspension. His May 6 executive order both expanded the tax relief and continued the emergency declaration. 

House Speaker Todd Huston has suggested the governor may have authority to continue the suspension further under the statute’s wording.

State law dealing with other emergency executive orders bars the governor from renewing or extending a proclamation more than once without General Assembly approval.

The Indiana attorney general’s office did not respond to questions about whether additional extensions of the energy emergency would be legally permissible without action from lawmakers.

Top Republican lawmakers separately said earlier this month that there’s been talk of legislative action, but no decisions made.

Savings at the pump

Fuel market analysts say the tax suspensions appear to be having a noticeable effect on Indiana gasoline prices.

De Haan said comparisons with neighboring states suggest most of the tax savings are now reaching consumers.

“Indiana is about 63 cents lower than Michigan and 66 cents lower than Ohio,” he said. “I would estimate probably north of even 85% of the drop has been passed along.”

De Haan said Indiana’s prices have diverged sharply from neighboring states in recent weeks, even as the broader Midwest fuel market has faced refinery disruptions and volatile oil prices.

“Indiana has not seen prices go up since May 1,” he said. “You’re clearly seeing a substantial part of the gas tax relief being passed along.”

But he warned that motorists could see a rapid jump in prices if those suspensions end next month.

“If the suspension expires, your prices are going to dramatically climb, probably within 12 hours of it coming back into play,” De Haan said, estimating prices could rise by more than 60 cents per gallon relatively quickly once taxes resume.

De Haan said most of the tax reductions have likely already been reflected in pump prices, meaning future price movements would increasingly depend on oil markets rather than additional effects from the suspensions themselves.

“By next week stations will have basically passed along the gas tax suspensions,” he said. “Then, you’re just going to be subject to the same market conditions that push prices up and down on a daily basis.”