Braun extends suspension of Indiana’s gas taxes for another month

Gov. Mike Braun extended an emergency order Wednesday suspending Indiana’s gasoline taxes for another 30 days.

The suspension of the 62.5 cents per gallon of taxes that would otherwise be collected has contributed to Indiana having the nation’s lowest statewide average pump prices.

Braun’s decision, however, also is raising worries among local governments about the loss of vital funding for roadwork.

Braun said he would support the state diverting money from its cash reserves to substitute for the $100 million-plus monthly loss in road funding for state and local agencies. 

“This is a gas savings (that) is kind of a lifeline through a tough period like this,” Braun said. “Whatever happens at the federal level, we need to get through that.”

State’s prices lowest, but still higher

The taxes covered by the order, which was set to expire Sunday without an extension, totaled roughly 59 cents per gallon of gasoline in May. Those suspended taxes would now be 62.5 cents a gallon due to a bump for June in the state use tax — effectively the state 7% sales tax collected on gasoline.

Braun first declared an energy emergency on April 8, temporarily lifting the state’s sales tax on gasoline to offset the rapidly escalating cost of fuel when Iran closed the Strait of Hormuz — a key transit hub for oil imports.

The governor extended the suspension for another 30 days through a second executive order May 6 — this time lifting the state’s 36-cents-per-gallon excise tax too.

Indiana’s average gasoline price Wednesday was $3.59 per gallon, the lowest statewide mark in the country and below the national average of $4.26, according to AAA’s tracking. The state average was $2.68 in late February before President Donald Trump launched the war with Iran.

The executive order issued Wednesday by Braun extends the tax suspension through July 7.

Braun indicated the state’s energy emergency statute grants him the authority to extend both gas tax suspensions through early August, if needed, before legislative action is needed.

Impact of lost gas tax revenue

Gas tax collections amounted to about $1.6 billion during the 2025 fiscal year, according to state tax reports.

Collection of gas tax revenue — which is directly paid by fuel distributors — lags about a month from when gas is sold at the pump. That money is later distributed monthly by state officials in a formula dividing it between the state Department of Transportation and city and county governments.

Those local governments have not yet seen a hit to the amount they receive, but are facing decisions on whether to delay planned road projects.

Local governments have already asked the Braun administration to divert other state money to replace the lost gas tax funding, said Matt Greller, executive director of Accelerate Indiana Municipalities, the statewide organization representing cities and towns.

“If this becomes a long-term suspension, that’s where the real concern begins,” Greller told the Capital Chronicle. “We can probably make our way through a short-term situation.”

Braun said the state is forgoing roughly $90 million a month in excise tax collections and $50 million a month in sales tax.

New forecast shows big growth in Indiana surplus

Money to replace the lost gas tax revenue could come from larger-than-expected state cash reserves, but that could have to wait until legislators start working in January on the new two-year state budget.

The state’s latest revenue forecast from December projected those reserves growing to $3.4 billion by June 30, which is the end of the state’s current fiscal year. The state ended the last fiscal year with $2.7 billion in reserves.

Braun’s state budget director, Chad Ranney, said the Indiana Department of Transportation has some cushion from immediate effects of the gas-tax suspension through a $300 million reserve fund.

“Before INDOT ever has to adjust its capital program or its construction program, they could forgo that 300 million, and it would just eat into this budget reserve,” Ranney told the Capital Chronicle. “It would not affect money that they’ve budgeted for specific projects.”

Braun told reporters he’s been talking with legislative leaders about protecting local governments.

“We’ll backfill those lost revenues into locals, so they won’t have to worry about it,” Braun said.

Question of authority

Braun suspended the gas taxes using a state statute that allows the governor to declare a state of emergency for 60 days.

Statute permits the governor to renew the order once, for a maximum period of 120 days. Any additional extensions require legislative approval.

Braun’s initial order declared an emergency for 30 days — half of what statute allows. In May, Braun told reporters he believed he could not extend the suspension beyond June 7 without a special legislative session, but the governor now believes statute grants him authority to suspend the tax until August.

House Speaker Todd Huston said in a statement that House Republicans support Braun’s decision to continue the suspension — backing the governor’s interpretation of statute. 

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“State law allows energy emergencies to last up to 120 days without legislative action,” Huston said. “Heading into the next budget session, we will look at existing resources to ensure we have the road funding necessary to support our infrastructure which Hoosiers and businesses rely on every day.”

Braun told reporters the attorney general’s office has not weighed in on his decision to continue the emergency order, which “must mean that there isn’t anything to weigh in on.” 

Attorney General Todd Rokita’s office did not immediately respond to a request for comment Wednesday.

Braun said he hasn’t yet discussed the possibility of a special session should lawmakers wish to extend the emergency order beyond Aug. 7.

Reactions from legislators

Questions of executive authority aside, lawmakers expressed bipartisan support for Braun’s decision.

“Even though Indiana has one of the lowest costs of living in the country, high gas prices continue to be a major concern for many households across our state, which is why I support the governor’s move to temporarily extend the suspension of the sales tax and excise tax on gas and provide some short-term relief for Hoosiers,” Republican Senate President Pro Tem Rodric Bray said in a statement.

Indiana Senate Minority Leader Shelli Yoder, D-Bloomington, said Hoosiers deserve relief at the pump, but placed blame for rising prices on the war with Iran.

“Hoosier families are once again paying the price for decisions and events far beyond their control,” Yoder said. “Gov. Braun is trying to shield Hoosiers from the consequences of policies he and his political allies support. While temporary relief may help today, Hoosiers deserve more than a band-aid after the damage is done.”

This story has been updated with additional details and comments.