Why It Matters
Indiana’s temporary suspension of gas taxes will drain more than half a billion dollars from road maintenance and local infrastructure funding. The state has committed to reimbursing local governments from reserves, but the broader question of long-term transportation funding remains unresolved as lawmakers prepare for budget negotiations this winter.
What Happened
Governor Mike Braun paused the 7 percent sales tax on gasoline in April and waived the 36-cent-per-gallon excise tax beginning in May. The dual suspension, which provides motorists with a combined 61-cent reduction per gallon, runs through August 6.
The Indiana Department of Transportation projects a $358 million revenue loss through October. Local governments across the state face a combined $175 million shortfall over the same period, reducing their ability to fund road repairs and upkeep. Combined, the state and local hit amounts to $533 million.
To mitigate the local government impact, the state has pledged to reimburse municipalities and counties from the State Highway Fund. State Budget Director Chad Ranney is scheduled to request a fund transfer to the Board of Finance on July 21, with motorists expected to receive distributions within five to seven business days after approval. Similar transfer requests are planned for August and September Board meetings to cover losses across all months of the holiday.
Braun indicated that the gas tax suspension represents the extent of relief he can provide without legislative authorization. “It’s not going to cost us anything in the sense that we’ve got reserves that are there for that intended purpose,” the governor said of the state’s ability to cover the local government reimbursements.
By the Numbers
$533 million — combined projected loss to state and local governments through October
$358 million — Indiana Department of Transportation revenue loss
$175 million — local government revenue loss
61 cents — per-gallon tax savings in the current month
7 percent — state sales tax rate on gas paused in April
36 cents — per-gallon excise tax waived in May
August 6 — date tax breaks expire
Zoom Out
Gas tax suspensions have become a recurring policy tool during periods of elevated fuel prices. Indiana’s approach—pausing both sales and excise taxes while pledging to backfill local coffers—reflects the tension between short-term consumer relief and the long-term solvency of transportation infrastructure programs.
Indiana last undertook a major overhaul of its road-funding system a decade ago. With the current holiday set to end and reserves being drawn down, transportation experts and policymakers have flagged the need for a more comprehensive solution to sustain highway and local road investment.
What’s Next
Braun’s administration will process local government reimbursements through a series of Board of Finance approvals over the coming weeks. The state legislature will take up broader road-funding discussions during its budget-writing session, which begins in January. Those conversations are expected to address whether Indiana’s existing transportation revenue model can sustain infrastructure needs in the long term.