State relief on gasoline prices unlikely for now

INDIANAPOLIS - Motorists in Indiana could save at least 13 cents per gallon of gasoline if the state suspends sales tax on the fuel. At least one state lawmaker is advocating the suspension, but Gov. Mitch Daniels has been cool to the idea.\n"A straight answer now is that I don't believe it would be a responsible step," Daniels said. "The state is still coming out of bankruptcy, and it would not provide dramatic relief to any individual."\nPrices topped $3 per gallon at some stations across the state Wednesday and were at $3.49 at some stations in Indianapolis and $3.50 at one station in South Bend.\nEven when prices were averaging about $2.60 cents per gallon earlier this week, state Rep. Dave Crooks, D-Washington, said Daniels should suspend the gasoline sales tax just as the late Gov. Frank O'Bannon did in 2000, when prices hit about $1.80 per gallon.\n"I understand the state is in a tough state fiscally, but so are Hoosiers and they need relief," Crooks said. "I'm hearing about this from people all over my area.\n"It seems reasonable to me to suspend the sales tax for a 90-day period to see if prices could come back to a more reasonable level."\nAccording to AAA's weekly survey of gas prices released Wednesday, the average price of regular unleaded in Indiana was $2.62 per gallon -- just below the all-time record of $2.63 set Aug. 19. But the figures were released at 3:15 a.m. and did not reflect price increases that occurred later in the day in part because of the disruption of the flow of oil and gasoline by Hurricane Katrina.\nFears of gas topping $3 a gallon already had existed because of high crude oil prices and refinery limitations. The hurricane that ravaged Louisiana, Mississippi and Alabama compounded the situation, knocking off refineries and pipeline links in the Gulf region that allow gasoline, heating oil and jet fuel to flow to other markets.\nThe state's 6 percent gasoline sales tax is separate from an 18-cent state excise tax and an 18.4 cent federal excise tax charged on every gallon sold. The sales tax is applied to the base price of gasoline before the excise taxes are added on.\nSo if the total price of a gallon was $3, motorists would save about 16 cents per gallon if the sales tax were suspended. If motorists filled their tanks with 15 gallons per week, they would save $2.36 per week, or $122.62 per year. If the total price per gallon was $3.50, they would save $146 a year.\nWhen gasoline prices jumped to about $1.80 per gallon in 2000, O'Bannon drew national media attention by suspending the gas sales tax from July through early September. He said it was needed to help residents cope with higher prices and keep Indiana businesses competitive.\nThe move, which some Republicans called an election-year ploy, saved motorists more than $46 million, but it cost the state the same amount in revenue at a time when the economy was slowing and the state's budget surplus was dwindling.\nState officials say it is difficult to separate gasoline sales tax revenue from other sales taxes, but the State Budget Agency is trying to determine if consumption has been rising or falling and whether the state is getting a windfall from the higher prices.\nOfficials also said it was possible that because of higher gas prices, people are cutting down on other purchases, meaning less sales tax revenue in other areas.\nDaniels said that suspending the tax might be a popular move, but it would not be in the state's best interest. The two-year budget lawmakers passed last April was projected to leave a budget deficit of $172 million by July 2006, but Daniels is trying to eliminate it by withholding some appropriations and other moves.\nMotorists had different opinions on a sales tax suspension.\nHoward Bulpin, outside a South Bend station where gas was selling for $3.19 a gallon, said he was all for it.\n"I think if they don't curb gas prices, regardless of the hurricane, you're going to see inflation like we saw in Britain. Very bad inflation," he said.\nBut Dick Eichorst, at a Sunoco station just south of South Bend where gas was $3.50 per gallon, opposed a sales tax suspension.\n"The last time they did that, that's when the state got in trouble," he said. "They've been in trouble ever since. I don't think that's the answer"