INDIANAPOLIS (AP) - Indiana Republicans want to increase taxes and fees on motorists in order to pay for infrastructure improvements across the state. It’s a continuation of a trend pushed by the GOP in recent years that critics argue is shifting the tax burden away from the wealthy and onto the middle and working classes.
Experts have given poor quality ratings to Indiana’s roads and bridges and lawmakers have sought for several years to find a way to pay for them without tapping the state’s $2 billion reserve fund or cutting other programs.
A proposal unveiled Wednesday by GOP House Speaker Brian Bosma purports to do just that, by increasing the cost of fuel at the pump by 10-cents-a-gallon, while requiring vehicle owners to pay an additional $15 a year registration fee. It would also make it easier for local governments to raise money for infrastructure by allowing more small towns to impose local vehicle registration taxes.
Republicans say their plan is fair and makes sense: people who use the roads more should pay more.
“I drive a lot more than the average Hoosier, so I’ll pay more. And that’s right,” Bosma said.
But Democrats counter that Republicans are asking all motorists to pay for infrastructure after pushing other tax policies that favor the wealthy. In recent years, GOP backed plans have eliminated taxes on inheritances over $100,000, cut corporate tax rates and cut property taxes while increasing the sales tax. They also passed an income tax cut.
That’s eliminated about $650 million from the state’s budget, estimates Purdue University economist Larry DeBoer. The House Republican roads plan, meanwhile, would raise about $300 million in its first year and about $480 in 2019. The GOP says the state needs to spend about $1 billion a year for maintenance and improvement projects.
When looked at holistically, these policy changes amount to shift in tax philosophy away from the idea that those with more should pay more.
For example, corporate taxes are paid predominantly by shareholders, who get less in return on their investment, or are passed on to consumers in the form of higher costs. But a sales tax is charged to all at the same rate. And the state’s 7 pennies-on-the-dollar sales tax takes away a greater percentage of a poor person’s income than it does of someone who is wealthy.
“You’re moving from taxes that are probably progressive, or at least neutral, to a tax that is probably regressive,” said DeBoer, who cautioned that even without the tax cuts in recent years, it was unlikely lawmakers would have shifted that money to roads. Under Republicans, the school of thought is people should pay for services they use, DeBoer said.
Bosma argues that Republican tax policies have benefited employers and improved the economy, the results of which have trickled down to workers.
“We set the right tax atmosphere here for employers, for entrepreneurs.” said Bosma. “It’s better jobs, it’s higher wage. That tax cut formula has worked well.”
Still, Democrats were befuddled that a party which has historically championed tax cuts now wants a sizable increase.
“This is going to be first session I remember coming into that the Republicans are advocating for tax increases,” said Senate Minority Leader Tim Lanane, D-Anderson. “… At the same time, we’re continuing to give tax breaks to corporations and businesses. How are they going to explain that?”
Morton Marcus, a retired Indiana University economist, says that the trucking and manufacturing sectors don’t pay a fair share under the House GOP roads plan.
Heavy-duty trucks used to ship manufactured goods weigh much more than passenger cars and, thus, cause more damage to the state’s infrastructure. Bosma said heavy trailers are charged a registration fee and that the GOP plan would add additional fuel taxes on commercial vehicles, but acknowledged it was an issue.
But under the GOP roads plans, there is not enough distinction, Marcus said.
“The trucking lobby is very strong. The manufacturing lobby is very strong,” Marcus said. “I would like to see a reexamination of the tax on trucks.”
He also said tolling makes sense, an idea that Republicans said they are exploring.
“You want to drive on a premium road? You pay a premium price,” Marcus said.
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